The China – US Trade War (II)
Written by Alfonso Elizondo
As US companies have been relying on China as a source of cheap labor and parts, retailers import goods from China. Apple imports iPhones assembled in China and in 2018 the US imported a total of $539.5 billion of Chinese products. Chinese factories employ millions of workers who are now in danger of losing their jobs.
On the other hand, China plays a fundamental role in financing the huge US debt. With $1.1 trillion in Treasury bonds, China is the main foreign creditor, just ahead of Japan, and this is the equivalent of the combined holdings of the Treasuries of Brazil, the United Kingdom, Ireland and Switzerland. Washington uses that debt to finance everything from tax cuts to fighter planes.
Many Chinese scholars are looking at the possibility of getting rid of US Treasury bonds, but such a move could adversely affect the value of their own holdings and limit access to the US dollar which is the world’s reserve currency.
Despite concerns over the trade war, many at the SALT Conference in Las Vegas applauded Trump for confronting China. The optimists are hoping that the duration of this trade war will be short and that there will be a trade agreement between both nations as soon as possible.
According to David Kelly, global strategist at JP Morgan Funds, the positive side of these wars is that they are so clearly damaging to the US economy and its businesses. He thinks that despite current concerns, they are unlikely to be a long-term feature of the global financial landscape. But some think that the damage to the relationship between the United States and China will be very difficult to undo.
Addendum: Our hypothesis is that we are experiencing the beginning of a new global formula in the economic, political and financial spheres and therefore we do not have the slightest idea of what is going to happen, except that with climate change, geological cycles and chaos in galaxies, human civilization may disappear before an agreement is reached between the nations of the world that are now at war.