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Benny Beaver Outed in NY Times
UW_Doog_Bot
Member, Swaye's Wigwam Posts: 14,309
in Tug Tavern
"“Everyone was saying: ‘Oh, it’s a negotiating tactic. It won’t last long,’” Mr. LaFrazia recalled.
But nearly a year later, the trade war shows no sign of cooling off. So ControlTek, the electronics manufacturer that Mr. LaFrazia runs near Portland, is taking steps to protect itself, a strategic shift that has been repeated in boardrooms and executive suites around the world in recent weeks.
ControlTek is rewriting contract language to make it easier to pass the cost of tariffs on to its customers. It is shifting supply chains out of China where possible, and redesigning products to avoid Chinese components where it isn’t. And as a tiny player in an enormous global industry, it is discovering that there is only so much it can do.
“We’re very much at the end of the whip getting thrown around,” Mr. LaFrazia said."
Good Read on the Trade War and its effects
Also, like I said, expect to see acceleration of supply chains leaving China.
[Over time, ControlTek has learned to navigate the system. Suppliers are sourcing components from Vietnam, Malaysia and other countries where possible, and ControlTek has begun factoring the tariffs into its product designs.
“We’ll design China out,” Mr. LaFrazia said.]
Comments
Fuck China
There have been a number of ways they've continued to drive demand but almost all of them have to do with China going from a net saver to a net debtor. How long it takes to catch up with them remains to be seen. Maybe they can manage to grow their way out but even rosy GDP growth numbers don't match debt growth numbers.
Unfortunately, to your point, validating any underlying economic data for any closed economy is a difficult task. The firm, emarketer, doesn't give too much detail about where the data originates.
https://www.emarketer.com/newsroom/index.php/2019-china-to-surpass-us-in-total-retail-sales/
Sorry HondoBros. Maybe one day the US will lose again and then you can be happy.
The problems facing the Chinese economy, and the worries expressed by Chinese leaders, are so deep that it no longer requires much imagination to figure out that reported GDP in China simply does not represent what we think it represents elsewhere. Yet some economists have not always understood the implications, and they often seem to refuse to adjust their methodologies to take into account the aforementioned problems with China’s reported GDP data. Yesterday, for example, I read a report written by an economist that discussed the implications of China’s PPP-adjusted GDP being the biggest in the world.]
[The point is that if there has been a divergence between China’s reported GDP figures and the country’s underlying economy, there are at least three completely different ways that this discrepancy can manifest itself. Observers too often confuse the three, however. For example, I have said many times that I believe that if China’s GDP were to be expressed in a way that is comparable with that of other countries, it would be growing at less than half the current reported growth rate.
A lot of people interpret this to mean that I think Beijing is falsifying the data, but I don’t mean that at all. In my mind, the biggest problem is that China’s reported GDP is an input into the economic system, not a measured output. To make China’s GDP figures comparable to those of other countries, the input numbers would have to be adjusted with some relevant output, such as the amount of bad debt that should be (but isn’t) written down in a given time period. If this amount were subtracted from China’s nominal GDP growth rate, the resulting adjusted growth rate probably would be a lot closer to what economists think of as GDP than the country’s actual reported GDP data is.]
https://carnegieendowment.org/chinafinancialmarkets/78138
I think the current party line is to pump up domestic consumption to try and make up for the loss of net exports. Since they've already been pumping private savings to float investment(the Chinese stock market as an example) and created lots of private debt I don't think it will work. People are feeling the pinch of credit drying up. As always though, LIPO.
Main article: Backyard furnace
Backyard furnaces in China during the Great Leap Forward era
With no personal knowledge of metallurgy, Mao encouraged the establishment of small backyard steel furnaces in every commune and in each urban neighborhood. Mao was shown an example of a backyard furnace in Hefei, Anhui, in September 1958 by provincial first secretary Zeng Xisheng.[19] The unit was claimed to be manufacturing high quality steel.[19]
Huge efforts on the part of peasants and other workers were made to produce steel out of scrap metal. To fuel the furnaces, the local environment was denuded of trees and wood taken from the doors and furniture of peasants' houses. Pots, pans, and other metal artifacts were requisitioned to supply the "scrap" for the furnaces so that the wildly optimistic production targets could be met. Many of the male agricultural workers were diverted from the harvest to help the iron production as were the workers at many factories, schools, and even hospitals. Although the output consisted of low quality lumps of pig iron which was of negligible economic worth, Mao had a deep distrust of intellectuals who could have pointed this out and instead placed his faith in the power of the mass mobilization of the peasants.
Moreover, the experience of the intellectual classes following the Hundred Flowers Campaign silenced those aware of the folly of such a plan. According to his private doctor, Li Zhisui, Mao and his entourage visited traditional steel works in Manchuria in January 1959 where he found out that high quality steel could only be produced in large-scale factories using reliable fuel such as coal. However, he decided not to order a halt to the backyard steel furnaces so as not to dampen the revolutionary enthusiasm of the masses. The program was only quietly abandoned much later in that year.]
The whole thing reminds me of Mao's "Great Leap Forward" only with GDP numbers instead of steel production quotas. Huge "economic numbers" are being driven by a lot of unseen costs that the reality of will eventually set in. It's better as a situation than the Great Leap in that you won't have massive starvation but I won't be surprised if you see massive deleveraging for a decade or more with all of the debt accrued.
American competitiveness is in innovation(Cdawg is right in this). American manufacturing is actually at all time highs despite the perception it is long gone. It's just that we manufacture using high-end processes to make high-end goods using lots of automation, as a developed economy should. Part of the trouble arises when our high end firms have to compete on unfair footing where a state with one of the most complex and well developed cyber espionage systems is designed to crush them(this is where Cdawg is wrong). For China it is a win-win(they like to use this phrase a lot as double speak), sabotage the US and gain economic prosperity at home. Theire're goal is world domination by the Chinese Communist Party, nothing less. The trade war though, could send China into recession and give the CCP more than they can handle at home.
My hope is that Trump's love for a deal will propel him to start striking trade agreements with allies. Great Britain is the most obvious candidate at the moment with a bilateral agreement. The US should be punishing China for unfair practices while championing fair and open trade across the rest of the world. We should be seen as the champion of the free world and a much better alternative to doing business with China. Not the less bad of two bullies.
Either way, we will have eachother.