How China is losing its trade war with Trump

Salvatore Babones:

President Donald Trump is threatening another round of China tariffs, this time 10 percent on the remaining $300 billion in Chinese goods that are not yet subject to punitive tariffs. The new tariffs should go into effect on September 1, barring a change of heart on the part of the president or some real action on the part of the Chinese.

Trump’s aggressive push on tariffs has thrown the country’s expert class into a tizzy, with pundits predicting a severe shock to the American economy, blaming the trade war for every blip in stock prices, and warning of the potential for runaway inflation as consumers pay the price for Trump’s tariffs.

Meanwhile the economy is employing record numbers of people, inflation is runningwell below the Fed’s target rate, and stock markets are slightly up since the beginning of the “trade war” in April. The data simply refuses to satisfy the pundits’ appetite for economic carnage.

With the economy refusing to cooperate with their “gloom and doom” narrative, America’s pundits are now arguing that economic pressure is no way to get a trade deal from China. When a Chinese Communist Party newspaper tells them that “China will never give in to pressure,” they believe it.

And who knows? Maybe they’re right. But if China doesn’t give in to pressure, then its manufacturing base will continue moving to Vietnam and India. Less labor-intensive assembly work will move to Mexico, which has now displaced China as America’s top trade partner. China will lose its unique position at the center of global production networks, and with it much of its leverage over global politics.

All of these trends are in America’s national interest. And Trump’s trade war benefits America’s allies, too. In fact, the only country in the world with an interest in China holding all the strings of global value chains is China. If the Chinese don't realize that, then they’re in for some real surprises as the trade war drags on.

The United States, at worst, has not been affected by the trade war. Vietnam, India, and Mexico are clearly winning the war. Meanwhile the European Union will benefit from any improvements in Chinese economic practices that result from the trade war. Ditto post–Brexit Britain. The only one losing is China.
...

China has gotten away with breaking the rules of international trade for two decades.  It is now become a costly task to try to maintain their cheating.   It could very well be disastrous for the Chinese economy which should be having trouble containing the housing and other bubbles it has produced internally.