Liberation or Ruination Tarrifs – Part 5

Q: Seems like the Chinese are not backing down from their retaliatory tarrif of 34% on US imports. As a consequence the US has slapped over 100% additional tarrifs on China. How do you see the final outcome panning out?

A: Kompf the Chinese have already war gamed this scenario along with countless others. Its conceivable they may have even war gamed a full scale US and EU import and export embargo on China. So this will not come as a surprise to the Chinese planners. The question now is can their simulations translate from theory to reality? That is the only question. Kompf I am not saying the tarrifs hikes will not cause China any economic pain, what I am simply saying is the grief quotient has already been factored into the calculation. This is different from saying the Chinese will not find a way to reduce these tarrifs where possible bc these are hardly ideal. I believe there will be back channel negotiations because no one really wins from these big tarrif hikes. US consumers and even manufacturers will certainly feel these hikes sharply and if they continue it might even spike inflation and eventually trigger a recession….my feel is in these few weeks we are likely to see some form of face saving reversal where the US will reduce these tarrifs on China and China will likely concede some ground. That is likely. As it is, both sides stand to lose big time and I don’t see this as a sustainable formula because it pushes the US and China relationship into a very dangerous territory.

Q: Why do you say, if the tarrifs are not reduced it will push US and China relationships into a very dangerous territory. This seem to be a strange choice of words (interruption).

A: No Kompf. A 100 something percent tarrif is just as good as a trade embargo. And if it is not settled the possibility of a kinetic conflict between the US and China is a real possibility. I am quite cold blooded when it comes to these sort of assessments. I happen to believe very strongly that what Clausewitz once theorized about war is reliable in the past as it is today – war is a continuation of politics by other means and if you peruse history Kompf, you will find that my prediction is not as off the wall as some may have you believe. In 1941, America imposed an oil and rubber embargo on Japan. One year after that Pearl Harbor was attacked in a coordinated war that took control of most of the Pacific and South East Asia. This may all seem like an irrational strategic move, but if one war game the various options, war is very enticing especially if China believes they hold the upperhand now. The Chinese according to General Yeo are not aggressors, but if they are faced with an existential threat of domestic upheaval due to mass closures of their export orientated factories and millions of Chinese suddenly find themselves displaced and marginalised, tell me where else can they go? Tell me Kompf. Do you think these tarrifs that has hit 185 countries is just a simple and fancy enterprise? Trump may just be pulling off a Nixon shock event like what once transpired in 1971 when he forced Europe to abandon the gold standard, but Nixon went to great lengths via Kissinger to assure US reliable allies that its role as a security guarantor would remain intact. Today its different, Trump is threatening to decamp from NATO and the South China Seas, if you’re a high ranking Chinese planner how would you interpret these moves all your weightings across the strategic game board would change from blue to red – would you not say that these tarrif hikes are just a way for the US to keep its primacy intact on the cheap by compelling countries to choose between aligning themselves with the US hegemon instead of jumping on the Chinese bandwagon and if you are that planner wouldnt you at least entertain the prospect of war as a means of perpetuating your diplomatic and geo economic goals…after all, it doesn’t get better than this. Think! Kompf isn’t the word dangerous now an understatement?