Trade war

No doubt trade war has become the talk of town recently. Well, perhaps I am a bit exaggerated but certainly it is the most concerned topic among the economic animals now.

Not surprisingly most, if not all, local commentators hold the same view that the U.S. initiated this dispute and it is bullying China. It is easy to understand the reason why because people here in Hong Kong has relationship with China in one way or another and this connection brews the sentiment of sharing the same boat. When all people speak in a same tone then perhaps it is time to think out of the box so why not put self in a neutral stance to look at this issue?

It is true that the dispute was provoked by the U.S. and most people knows that trade deficit is not the central piece but just an excuse and it is a means rather than the end. It is just all about the challenge that China is imposing on the U.S. that upsets it because China has been flexing its muscle in high profile more than ever. However, on one hand trade deficit does exist indeed. Perhaps before the escalation of the tariff punishment not many people realized that China is exporting almost US$500 billion to the U.S. annually while the latter just exports US$130 billion to the former. China does nearly 4 times more than does the U.S. yet all commentators or all the Chinese officials just ignored this fact of imbalance.

I think this is what Trump said unfair. Some may say it is because the Americans are shopaholic so they imported 4 times more than their export. It may be true but there is a term "price elasticity" in the fundamental economics meaning the demand drops when the price rises for the non necessities. Why Americans buy so many Chinese products it is because China sold them cheap. China just exploits the U.S. market by capitalizing its oversupply production capacity resulting in low costing. Many of us who has ever been in a department stores hosting a true crazy sale know when things are so cheap then we just can't help but just shop even without thinking whether at all the stuff is necessary. The Americans are in an all year round sale "unfortunately".

The other unfair practice that Trump mentioned is that there is literally no barrier for China capitals to do business in the U.S. but foreign capitals face much difficulties when they do the same in China. The requirement of joint venture is almost a must for any sizable investment. Let alone many other permits and approvals.

Back to the trade imbalance, China literally can export most of its products to the U.S. market but she imposed import barrier to quite a number of U.S. products or produces. China just wants to enjoy the goodies from the free trade but left all those unwanted on the table. China really has to integrate into the system and learn what free trade is really about in order to earn the respect from the other nations.

Despite Trump's ultimate target is not to rectify the trade imbalance but it is really one of the issue that appears apparently unfair to the U.S. and he just capitalizes so well on this excuse to launch the deterrent of the uprising China challenge. People say Trump practices unilateral policy on global affairs but one must understand that Trump does not has noble upbringing background nor is he an elite graduate of Ivy league. He just made some money to become rich but deep inside he is a street boy whom does not bother boxing that bounded by rules but street fighting. As a line in the film Yip Mon puts it, Kungfu just ends up into two states, the winner stands while the loser lies down.