China

[dawg80]

Buck Sexton, conservative commentator, has an indepth analysis of the Chicom economic situation, it is a good read. He focuses on facts and the legit concerns we, and our western allies, should have. No, he does not advocate for us to run for the hills screaming "the sky is falling." He doesn't think it is advisable to agree with Joe Biden and simply dismiss the Chicoms as some "JV economic squad" either.

I agree with his overall assessment. Trump is taking them on, just as he is standing up against the forces of illegal immigration. Funny how Mexico panicked and sent their economic secretary seeking a meeting. Hmmm.... Back to China, they too will push the envelope and get away with as much as possible, if we let them. Thankfully we have a leader who sees the bullshit China is peddling and won't just take it. It would be helpful if the Dems and RINOs would set aside their petty political bickering and stand with our President, offer advice and suggestions, and let's resolve these problems.

Alas...

[Guisslapp]

Such as?

AI, IOT, robotics, MOD, genetic engineering...

[Guisslapp]

In 1991 I made the first of two trips to China. That time I represented a large Fortune 50 international corporation, we went to negotiate our piece of the potentially gigantic Chinese market, and to establish partnerships. I have posted before about the border crossing between then Chicom and Hong Kong. Years later I returned, as part of a separate business effort, again to establish partnerships. So! it would be silly for me to bash US involvement with China. And, actually, I don't! I still believe there can be a healthy, mutually beneficial economic relationship between the US and China, and our western allies' dealings with China.

BUT! that doesn't mean we bury our heads in the sand and just HOPE it continues to work out. There are some very serious reasons to be concerned. Example: 80% of pharmaceuticals, especially drugs for cancer treatment, high blood pressure, and some other critical medicines are manufactured there. And! computer chips, OMG!

And a personal pet peeve...even the motors for Briggs & Stratton are made there, and they are pieces of shit! If you have an old Briggs & Stratton mower, like pre-2005 especially, hold onto it. The old US-made motors are already in demand.

The Chicoms cannot be trusted. They are frickin' commie bastards!! We need to back away from being so dependent on the China market for our exports, and we need to get some of the manufacturing back here, in the good ole USA. (Do you hear me Briggs & Stratton!)

I have negotiated deals with the Chinese government. You just have to be thoughtful and realistic about what you are giving up and what you know they will be willing to provide. Some things they won’t and can’t do, but you know that going in. While it would be great to loosen up their requirements to provide greater flexibility on the type of deals you can do there, my concerns are (1) I see no scenario where the Chinese government will give up what they believe are key parts of the Made in China 2025 strategy, and (2) the business environment for growth for American companies was far better (for exploiting the China market and supply chain ...and elsewhere) a year ago than it is now after Trump started a trade war.

I don’t disagree necessarily with his aspirations, but I disagree with harming American business if you don’t have a real plan that will work to get the concessions from China.

That is why I am asking the question. What are we realistically planning on getting out of this trade war?

[DONW]

You should move to China if you think they're a better country than the US. Americans are the ones that sold out our country to China. About 30 years ago a salesman came in my office and said he was going to China and have them build utility trailers that he was going to sell in the US. I only buy something made in China if I have to have it and can't find it made in another country. Sounds like you weren't a very good negotiator.

[Guisslapp]

You should move to China if you think they're a better country than the US. Americans are the ones that sold out our country to China. About 30 years ago a salesman came in my office and said he was going to China and have them build utility trailers that he was going to sell in the US. I only buy something made in China if I have to have it and can't find it made in another country. Sounds like you weren't a very good negotiator.

Entirely non sequitur.

[dawg80]

Well, just saw where other countries, namely India and South Korea in particular, and others have offered to fill supply gaps. So, either China agrees to renegotiate some deals, or we'll tell them we ain't buying 10 billion widgets from you this year, we're getting ours from other suppliers. Not sure exactly what products in the short term, but I guarantee businesses across the world will gear up to supply the US market. China needs us more than we need them...right now.

[Guisslapp]

Well, just saw where other countries, namely India and South Korea in particular, and others have offered to fill supply gaps. So, either China agrees to renegotiate some deals, or we'll tell them we ain't buying 10 billion widgets from you this year, we're getting ours from other suppliers. Not sure exactly what products in the short term, but I guarantee businesses across the world will gear up to supply the US market. China needs us more than we need them...right now.

You are missing some important points.

1. What is China actually willing to change? Again, that is what I keep asking. I don’t necessarily disagree that the trade war will hurt them more than it hurts us (if you measure it purely on trade) but we aren’t dealing with a country that will be motivated by that fact. Hurting them more than ourselves is not in itself a win. That is just a lose-lose proposition.

2. Many companies have already moved parts of their supply chains outside of China because for the past several years it is not the lowest cost option. Vietnam and Thailand are now that.

3. What American companies really want is access to China’s market as the development of its middle class represents the largest economic growth opportunity in the world. American businesses already produce in China to sell to China and that represents a lot of the growth our economy enjoys. China could shut that down and THAT would hurt.

4. What if China cuts off access to some of the critical raw materials of the future - rare earth minerals?

The trade war is already created a drag on global growth that has a spillover effect on all parts of the economy. What do we really think we are going to get out of this and how exactly is that going to play out?

[DONW]

We're China's biggest market, so if we don't buy their products, they don't have a market because their citizens don't make enough money to afford what they make. What Trump wants is for them to drop their high tariffs on our farm products that we ship to China.

[Guisslapp]

We're China's biggest market, so if we don't buy their products, they don't have a market because their citizens don't make enough money to afford what they make. What Trump wants is for them to drop their high tariffs on our farm products that we ship to China.

I thought this was about forced JVs and tech transfers. This was the concession they wouldn’t agree to (allegedly) before we imposed the latest tariffs. If this lost economic growth is about dairy tariffs, that is the definition of cutting your nose off to spite your face.

[johnnylightnin]

I thought this was about forced JVs and tech transfers. This was the concession they wouldn’t agree to (allegedly) before we imposed the latest tariffs. If this lost economic growth is about dairy tariffs, that is the definition of cutting your nose off to spite your face.

Yep. If Trump we’re negotiating FOR China, he’d be dumping US Debt. Just because you can do something doesn’t mean you should. There’s no clear strategy and the cost is very high.

[dawg80]

I'd have to do a little research on the rare earth metals question. I do know the US and Canada sit on HUGE reserves of gold, silver, copper...Mexico has lots and lots of copper too...and other materials our current EPA regulations make accessing too expensive. In a crunch, I assume, I would hope! we would say the environment be damned and simply go get all of it.

[Guisslapp]

I'd have to do a little research on the rare earth metals question. I do know the US and Canada sit on HUGE reserves of gold, silver, copper...Mexico has lots and lots of copper too...and other materials our current EPA regulations make accessing too expensive. In a crunch, I assume, I would hope! we would say the environment be damned and simply go get all of it.

Rare earths are used in semiconductors, memory, batteries, catalysts...the stuff used to make all the high tech stuff that will be used in the infrastructure of the 4th industrial revolution. These minerals are far more sexy than gold, silver, copper.

China is sitting on 44 million MT of it. Next biggest source is Brazil at 22 million, then Russia at 18 million. The US has 1.4 million. China currently accounts for 95 percent of the production of these minerals.

[dawg80]

Did some research...

rare earths are 17 elements (Periodic Table). They are NOT rare and can be found throughout the Earth's crust. However, that is in varying quantities, of course, and mining them is an economic issue especially in the US with strict EPA regulations. China does have the single largest supply, based on geopolitical boundaries, with 35% of the known supply. China produces 70% of the REs used today because they don't give a hoot about environmental issues.

Now, it should be noted that China currently produces 70% of the REs because they do so cheaply and the West sees no need to look elsewhere. That is about to change. An Australian company has reached an agreement with a US-based company to build an RE processing plant in Texas. THANKS to PRESIDENT TRUMP!! The US has one large RE mine, in California, that produces 50,000 tons annually. Right now it is sold as a commodity to China. Once operational ALL of that will go to the plant in Texas! The two companies involved are Lynas and Blue Line.

Also, US companies are recycling REs. A Nebraska company can extract 20% of the REs that were used in various products right now, and they hope to improve the process.

NOW!!! none of this means we shouldn't try to play nice with China and maintain as friendly relations as we can. But, we need to move away from our dependency on the Chicoms.

And don't blow off the importance of gold, silver, and copper in electronics, industrial applications, and manufacturing.

China leads the world in gold production and is a distant 5th in silver. Poland, Peru and Australia are world leaders. The US sits 6th in silver production, right behind China. In copper, China is a net-importer by far. You know, the stuff needed for wiring. And while China is a huge gold producer, they are also the world's #1 consumer and they are exhausting their gold reserves at a rate 5 times greater than the world average. They are also a net-importer of iron ore, another crucial ingredient in manufacturing.

All that to say, China doesn't hold all of the cards in this game of world poker.

[Guisslapp]

Gross simplification of the issue - its lack of actual “rareness” is not the problem. It is not economic to mine and extract the minerals in the US. And that is also why we send ours to China to extract when we do “produce” it.

[dawg80]

That's what I said in the first paragraph.