President Trump knew that China needs the US now more than ever but the US didn’t need China. We posted a presentation from former Tr...
President Trump knew that China needs the US now more than ever but the US didn’t need China.
We posted a presentation from former Trump Chief Strategist Steve Bannon regarding China. He discussed how China is in an economic war with the US. He said America was losing until President Trump. Then he added this:
Well here’s the game and right now we are converging on a point and they understand this. We could take the whole thing down. We can take, the whole thing’s built on a house of sand…If they [China] devalue their currency they are just going to flood more out. They got $3 trillion of reserves and trust me, in a New York second that thing would flood out in a second. That’s what their own people think about their economy. We’ve allowed these guys to push us around. We’ve allowed these guys to take the South China Sea…This trade war is going to end in victory and what you’re going to see is a reorientation of the entire supply chain out of China…
Bannon is right. We reported in May that just like the US in 2008, a perfect storm is building in China. The excessive and extravagant construction projects, cash-flow challenges and lack of demand in China all could combine for a major financial disaster.
Yesterday we reported how Forbes reported in August 2019 that President Trump’s actions would likely move American companies out of China:
Assuming Trump makes good on his promise to tariff all China goods at 10% starting Sept 1, with the very real possibility of those tariffs hitting 25% soon after, then it looks like more companies will move their supply chain.For a long time, China has been the world’s low cost, low regulation, manufacturer of choice. Even though multinationals would like to keep it that way, some 40% of U.S. companies are relocating at least some of their supply out of China, according to a May 2019 AmCham Shanghai survey.“This shows the disruptive effect the trade war is having on supply chains. If new U.S. tariffs do take effect September 1, the increased tensions will likely accelerate the relocation trends we are seeing now,” says Kenneth Jarrett, a senior advisor at Albright Stonebridge Group, a Washington DC based strategic advisory firm.
CNBC reported in July 2019 that more than 50 companies had pulled out of China due to President Trump’s actions:
The pace of companies moving production out of China is accelerating as more than 50 multinationals from Apple to Nintendo to Dell are rushing to escape the punitive tariffs placed by the U.S., according to the Nikkei Asian review.The trade war between the U.S. and China has dragged on for more than a year with 25% tariffs placed on $200 billion of Chinese goods. President Donald Trump is still threatening to slap duties on another $325 billion of goods. In wake of the intensifying battle, more and more companies announced plans or are considering shifting manufacturing from China.
In regards to the China economy, I can speak from first hand knowledge:
The Hong Kong economy was slowing before the coronavirus epidemic. This was because the China economy was slowing. The China economy was slowing, perhaps because it was a ‘paper tiger’ as Bannon shared and also because the tariffs have taken a toll.
I spoke with one CEO in China a half a year ago, long before the coronavirus, and he told me the story of how he was golfing with a couple of other CEO’s and the manufacturing CEO in China said the economy was horrible.
I also recently spoke with a plant manager in China of a plant that employs up to 9,000 and that operation recently looked outside of China for a place to build a new plant. They originally selected Vietnam but the property there was all gobbled up by companies coming out of China, so they settle for a new plant in Thailand.
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