Chinese trade wars

I am viewing with much interest the trade war being fought between the United States and China. I can't say I'm a huge fan of Donald Trump, neither can I say I hate him either. Sure his mannerism annoy me, but that is my problem and I can easily block that out.

What I am interested in is policy and I get the feeling Dr Peter Navarro is advising the Trump administration on China policy and more specifically the trade war based I what I have he has published regarding China policy. What we do know is China has been a destination for Western economies to set up manufacturing facilities for some time now.

We also know that China required international firms to partner with Chinese firms to manufacture goods, there is ample evidence that Chinese firms are exploiting this requirement and stealing intellectual property and processes.

The cost of doing business in China is increasing along with the risks. CEOs and Boards received massive personal remuneration benefits to move manufacturing production to China but workers were disadvantaged.

The cheap wages in China created, or distorted depending on your views, a cost effective manufacturing regime - especially at the lower value item spectrum. Manufacturing costs are now rising and CEOs are looking to new low-cost countries to set up manufacturing facilities.

Certainly low value manufacturing had distinct advantages in the low cost environment of Chinese manufacturing production. Supply chains had already been established in China, a low cost workforce existed and not a great deal of training was required.

The US tariff policy is designed to drive up the price of Chinese manufactured goods at a time as wages and costs are rising internally in China. We know that China is an export based economy, it is not a consumer economy so Chinese manufactured goods are vulnerable to an economic slowdown, the tariff policy is designed to target demand not supply.

The purpose is to improve the trade balance between the United States and China, it is actually in China’s best interest to negotiate as they will be the losers here. The pressure to transfer technology must also be addressed during these negotiations, this is an important objective.

Dr Peter Navarro has been discussing these issues for a long time now in his macro-economic classes and books, this is his prime opportunity to re-balance the equation. His aim i'm guessing is not to annihilate Chinese manufacturing but to use tariffs to force Chinese leadership to compromise or suffer massive losses when their currency is already stretched.