There is increasing concern that the possibility of another trade war with China is looming on the horizon. President Obama promised that there would be no trade war with China. Unfortunately, China is not feeling that promise the same way.
If a trade war happens, it could result in a recession. It is difficult to predict which country will win and which country will lose. Some believe that China may end up as the loser, because it will end up devaluing its currency to hurt U.S. exporters.
It seems that we are headed for another trade war with China, unless we act now. So how should we deal with the possibility of another trade war?
A lot depends on how fast our economy grows. If we cut our deficit, do not put restrictions on international trade, but allow it, and allow the unfettered trade that other countries wish to make, we will be hit harder by a trade war than a country with very little growth. However, if we are forced to make those kinds of trade policies, then we will be vulnerable.
It seems that a lot of people want to preserve our global economy, but not all of them are serious. The United States has taken certain steps that will give them an advantage in the future. For example, we will not intervene in the Middle East and keep military bases in countries that have business with us. We will not impose tariffs on foreign companies manufacturing goods in the United States, because our government knows that we will have a problem if we do.
If a trade war does happen, it will be more harmful to us than to any other country. Even if the Chinese were to retaliate by imposing tariffs, the trade deficit will continue to increase and the dollar will continue to weaken. Our currency will plummet.
This will cause massive inflation, which will push up our interest rates and foreign exchange rates. Inflation will cause us to lose more wealth, and we will have to raise interest rates to prevent a runaway economy. The situation will be the same with every other country that decides to retaliate.
It is hard to predict which country will win and which country will lose in a trade war. For example, in the last few years China has gotten back into the luxury furniture business. In fact, they are expanding the company to include aluminum, light construction, and some sort of commercial building.
To some extent, this is to compensate for the economic significance of China, which has lost a lot of its manufacturing capacity in the last decade. By investing in these other businesses, they will give them an advantage over the United States.
When it comes to trading, the United States should be careful to protect its market. They should do things that they did in the past, which is to protect themselves from foreign countries. For example, they should not slap tariffs on Chinese companies if they manufacture their products here.
China wants to be the world’s number one manufacturing power, and they are aggressively looking to buy our stuff. So they will retaliate against us, which will hurt our economy. Let’s get ready to fight this battle before it is too late.