Who Will Relent – Xi or Trump? On Actual and Perceived Payoff Matrices

NEC Chair Kudlow in response to the Chinese threat to impose tariffs on an additional $60 billion worth of goods (from Bloomberg).

“Their economy’s weak, their currency is weak, people are leaving the country. Don’t underestimate President Trump’s determination to follow through.”

When I hear Kudlow, and/or Mr. Trump, say something along these lines, I think back to a pungent aphorism I once heard being used between my parents, describing overweening hubris. I bet it’s being used in the hallways of Zhongnanhai (it was a sufficiently arcane phrase, so at the time I had to ask for a translation from my father).

Instead of engaging in debate over toughness, I think a more profitable route to understanding is to consider the payoff matrix to Mr. Trump vs. Mr. Xi. In other words, we should just consider the amount of pain that can be inflicted on each nation (e.g., US imports much more from China than China imports from the US), but rather what costs and benefits each leader faces.

For Trump, imposing tariffs just before the midterm elections would push up prices of imported goods — but with tariffs imposed on an additional $200 billion Chinese goods, some of those goods must necessarily be consumer goods, and so directly visible in terms of impact. The benefits would be to shore up the xenophobic elements of the Trump base.

For Xi, imposing tariffs will raise food costs, hit economic activity in sectors (particularly export) dependent on US imports. But the state could step in to subsidize food costs, subsidize agricultural production (already being done), and let the currency depreciate in order to offset decreased export competitiveness. None of these are painless, but for a regime that has incurred tremendous costs to buy domestic stability, I don’t think they weigh heavily. On the other hand, what’s the cost to Xi of seeming to kowtow to Turmp, in terms of perceptions of the Party leader’s strength? I’d say (as a non-expert on Chinese domestic politics) it’s probably high.

So, draw a net payoff matrix for Trump/Xi. Let’s say it’s in reality:

But Trump/Kudlow think it’s:

Then Trump will (mistakenly) believe that Xi will back down, and will therefore see that he can’t lose by adding on more tariffs. Xi knows his own payoff matrix, and opts to retaliate because he can’t lose.

If Trump knew Xi’s payoff matrix, he would not retaliate. But if we know anything, we know that Trump knows little of the world.

That’s why I don’t expect a backdown…

52 thoughts on “Who Will Relent – Xi or Trump? On Actual and Perceived Payoff Matrices

  1. Neil

    Do you have a view on the markets view of this? US equities are fairly buoyant while China stocks are not. Does this mean the market sees the US as “winning”?

    1. Menzie Chinn Post author

      Neil: I think the slowdown in Chinese stock market predates trade issues. On the other hand, I’d look at the global component (MNC shares) of the indices to infer “winning”. And there’s a difference between capital winning (that’s what the stock market measures) and capital/labor/consumer/firms winning.

  2. Moses Herzog

    This looks like we’re getting back to our “game theory” discussion again?? I still think it would be fun if you invited Yanis Varoufakis to make a guest post on Econbrowser as it relates to “game theory” and Chinese/USA trade.

    Menzie, as you know I have “bragged” about significant time spent in China (although I am sure most people would scoff at that, there are very negative stereotypes about westerners who go to China to work I am sure you are aware of, I still remain largely proud of the time I spent there). I am very curious about the “pungent aphorism” your parents used. If you feel it’s offensive or would turn off a significant portion of your blog audience you could e-mail it or something. As I am sure you have faced some especially bad things from uneducated Americans because your ethnicity, I can assure you I faced very similar from certain segments of the Chinese mainland population and I don’t think at least in a deep way it affected my feeling to Chinese overall. i.e—I wouldn’t take offense or be judgmental on whatever that phrase is. I can pretty much guarantee you would be borderline shocked at the things I have been exposed to as it relates to Chinese mainland society.

  3. Moses Herzog

    Another thing I forgot to say—You call yourself a “non-expert” in Chinese politics. This amazingly refreshing honestly is so much missing in general dialogue. Although this is leaning a tad towards the humble side on your part, probably accurate. This is one of the reasons I have great respect for you, as many academics have the personal problem spitting out the phrase “I don’t know” or a personal problem admitting because they qualify as experts in one (4–5) category does not make them experts in all categories.

    The reason I find this amazingly humorous is, I also do not consider myself an “expert” on China, but find myself knowing WAAAAAAAY more than the people labeling themselves China “experts” who pop up on TV seemingly every 20 minutes. Including—am I allowed to be so bold to say (???)—your old “pal” Peter Navarro.

  4. Anonymous

    “When I hear Kudlow, and/or Mr. Trump, say something along these lines, I think back to a pungent aphorism I once heard being used between my parents, describing overweening hubris. I bet it’s being used in the hallways of Zhongnanhai (it was a sufficiently arcane phrase, so at the time I had to ask for a translation from my father).”

    Kudlow is rehashing almost verbatim the nonstop nonsense from PeakDishonesty. When I see this nonsense – I think of two letters. BS!

  5. Anonymous

    “if we know anything, we know that Trump knows little of the world”.

    Trump certainly knows no economics. Let alone international economics or game theory.

      1. pgl

        Trump claims he did well at Wharton. Just like PeakStupidity bragging about passing a qualifying exam. Of course neither can tell us what they used as text books or who their teachers were.

        Of course if you had tried to teach either one of these nutcases – I doubt you would not it to be known. Me neither.

  6. Steven Kopits

    So, I agree that this contest can transform into one about winning and losing, rather than the underlying stakes. And therefore, both sides are loath to back down.

    “The benefits [of Trump imposing tariffs on China] would be to shore up the xenophobic elements of the Trump base.”

    This appears to be incorrect. Watch this video. http://tariffshurt.com/

    Among Trump supporters, I think there has been a belief that he can do no wrong. When people are paying more for Coca-Cola or cars or Pampers due to tariffs, it begins to dawn on them that Trump can actually hurt them. Farmers who are losing ag exports are unhappy. These are core Trump supporters as a group.

    The impact is not from the policy, per se, but on their underlying faith in Trump. It rebrands him closer to the view of his critics. I think that is the bigger risk for the President.

  7. Lord

    Trump is addicted to drama and has to create it if it doesn’t exist. Drama is a strong win for him personally, so while we may see some temporary negotiation, we will see many more swings along these lines. He is one to bash just to make up and make up just to bash.

    1. Anonymous

      Legalizing and taxing drugs and immigration are two of the dumbest policies imaginable.

      If I were an enemy intent on destroying the U.S., I’d want those two policies.

      The taxes will be tiny compared to the huge social costs.

      Strict laws and effective law enforcement, that deter drug use and illegal immigration, are the best policies.

    2. PeakTrader

      Also, I’ve shown you extensive data, evidence, history, etc. from economics, health care, law enforcement, etc. that show legalize and tax would cause extensive economic damage.

      Yet, you totally dismissed or ignored it all!

      1. pgl

        “I’ve shown you extensive data, evidence, history”

        You make this claim a lot which leaves everyone else falling on the floor laughing at you. If you have anything of value to provide here – do so.

        Oh wait you have never added a shred of value on any topic anywhere. So pardon the interruption and TROLL on!

      2. Steven Kopits

        I certainly have not dismissed any concerns about legalization. If you want to present them again for the avoidance of doubt, by all means.

        But let me take just one example: In the Netherlands, if I read the number right, they have about 170 overdose deaths annually on a population of 17 million. Applied pro rata to the US, that would give use about 2300 deaths from overdoses, not the 66,000 we saw last year. Overdose deaths would drop by 95% per the Netherlands model–a typical reduction achieved when prohibitions are repealed. Now, you get a lot more addicts for sure, but at least they are alive.

        Further, as a conservative, I am not opposed to aggressive demand suppression per Japan or Singapore, with the proviso that numbers actually matter in choosing one policy over another.

        Let me be plain: There is no way to stop hard drug smuggling into the US, for exactly the reasons I lay out in the article. At the end of the day, it’s not a matter of resources, but of politics. If you drove your mother, wife and daughter to Mexico in your car, would you be OK with having them cavity-searched on the way back while Customs disassembled your car into its component parts? Do you think that strategy is politically viable, because that’s what we have to do if you want to stop hard drug smuggling at the border. And realistically, not even that would help, because you can still fly the stuff across in planes and drones, leaving aside tunnels and the US postal service.

        The more brutal reality is that hard drug smuggling is up 50% under Trump. It is just gushing over the border, and it will get worse yet. And we will be losing a solid 50k people a year to overdoses, with year another round of surging inner city violence clearly on the horizon. Read the press, and you can already see the drug war is returning to Colombia.

        So, you can’t stop hard drugs at the wall, neither technologically nor politically. What do you want to do? Bad things are happening and worse is on the horizon. How do you want to play it?

        1. PeakTrader

          Steven Kopits, I’ve shown what works before in other countries. Now, you bring up the Netherlands, which has a much stronger drug rehabilitation program, although different than Japan:


          I’ve also shown before what actually works: Strict laws and strong law enforcement.

          For example, I’ve shown before, drug use was rising rapidly in the ‘60s and ‘70s. Around 1973, Congress was alarmed and overwhelmingly passed strict drug laws. The steep rise in drug use slowed, stopped, and reversed.

          1. Steven Kopits

            Apparently you didn’t watch Miami Vice in the 1980s. (The first season is worthwhile.) This was when Pablo Escobar was flying two and a half tons of cocaine per week into the US.

            And maybe you missed the crack cocaine epidemic in the 1990s. Or for that matter, the opioid epidemic today.

            Your choices are legalization or demand suppression. If you like, you can crack down on supply along with demand suppression. But it’s the demand suppression that matters. The illicit drug market, by my estimates, is along the lines of $300 bn (1.5% of GDP) per year. And the vast majority of that is profit. Whether Escobar or Guzman, it’s irrelevant. As long as you can make $5 million profit smuggling 50 kilos of cocaine across the US border in the recesses of a car or truck, there will always be a willing line of drug dealers and mules. In a black market, customers are always short product and willing to pay stiff markups. So it all comes down to supply and a tolerance for risk. And you can put a price on that. It’s a lot less than $5 million.

          2. PeakTrader

            Steven Kopits, there will always be demand for drugs.

            Studies show when drugs are decriminalized or legalized, demand increases, in part, because society, including teens, will believe they’re less harmful.

            Despite the propaganda, the War on Drugs prevented many millions of American drug users and addicts, along with reducing drug use, and saved hundreds of billions of dollars a year in social costs.

        2. PeakTrader

          Also, I presented 40 or 50 articles from credible sources before, including on economics, FBI and DEA data, American medical academies, historical evidence, etc..

          Since you dismissed and ignored the overwhelming evidence and decided to believe the drug propaganda saturated on the internet, most likely by drug users and libertarians, who may feel guilty of causing the problems you cite from their drug use, I see no reason to waste my time digging up and posting the info again.

          1. Anonymous

            “I presented 40 or 50 articles from credible sources before, including on economics, FBI and DEA data, American medical academies, historical evidence”

            Again with this stupid garbage. Hey – why not start your own blog so we can all read it and then make fun of your posts. Let’s see – what to call it.


  8. Moses Herzog

    I’m assuming soybeans kind of finding a “resistance level” of 885–900 on the November mini contracts is because the anticipated subsidies from trump’s federal government??? Are those government welfare payments to farmers still legal under trump if the farmers are black?? I’m old enough to remember when farmers and Republicans called federal government “big government” and old enough to remember when Republicans called welfare payments from taxpayers to farmers “income redistribution”. Boy those were the days weren’t they??

  9. pgl

    “Don’t underestimate President Trump”.

    I listened to the village idiot Kudlow when he uttered this. What did he think he was doing? Trying to stare down such thug in East New York? If we really tried to do this, the New York City police would have to spend the day investigating why Kudlow ended up in a trash bin all bloodied.

  10. PeakTrader

    China is in a much weaker position, because its economy is smaller (in dollars), dependent on exports and foreign intellectual property, and very inefficient or wasteful. China had extensive trade barriers before the trade dispute, and now getting a taste of its own medicine.

    A fair trade settlement will put China in a worse position than before the trade dispute.

    Many Americans in the Midwest care about the future and their children, and know what China is doing.

      1. PeakTrader

        Tio Juanito, Americans understand international trade very well, since the U.S. has benefited tremendously from international trade.

        The U.S. has benefited more than any other country, since it consumes more than produces in the global economy and in the long-run.

        However, what does your false assumptions and link have to do with my comment?

        You believing it’s nonsense shows you’re full of nonsense.

        1. Tio Juanito

          That’s some world class gibberish, I’ll give you that.

          Most Americans own a car, but few understand how an internal combustion engine works, or how a carburetor works, or why a differential is necessary if you want to drive around a corner.

          Most Americans have electricity in their homes, but few understand Ohm’s or Faraday’s laws, or how a generator creates electricity, or how to properly install a GFCI, or how to wire a three-way light switch.

      2. pgl

        Tio – thanks for this. Well articulated especially for a Cato dude. Very much in line with what Menzie has been saying. Of course PeakNonsense will not read it either as all he does is babble Trump stupidity.

  11. baffling

    “Many Americans in the Midwest care about the future and their children, and know what China is doing.”
    being from the midwest, i get a chance to return on occasion and get a gauge of their views. they do care about their future and their children. some of them are also seeing what trump is up to. his policies are not pro-america, they are pro-trump. there is a bit of change occurring in some folks back home, who are coming to realize the actions of the president are not for the best of the nation, but for the best of the trump brand. folks i know in the industrial and manufacturing businesses are getting hurt by the metals tariffs, and wondering if this is going to achieve anything. they used to like the idea of “winning”, but seem to be viewing it more like the charlie sheen episode every day.
    “A fair trade settlement will put China in a worse position than before the trade dispute.”
    if this is true, what incentive does china have to agree to such a settlement?

    1. PeakTrader

      Trump is working on giving China an incentive.

      Of course, it wants to continue cheating and stealing.

      Past presidents did little to nothing.

      You can thank Trump later.

      1. Anonymous

        “Trump is working on giving China an incentive.”

        He is! He has given the Chinese the incentive to screw American farmers. Thanks a lot Trump!

  12. Bruce Hall

    Tariffs are the tip of this game theory iceberg (parentheticals indicate time period of articles):
    https://leb.fbi.gov/articles/featured-articles/economic-espionage-competing-for-trade-by-stealing-industrial-secrets (Obama administration)
    https://www.washingtonpost.com/world/national-security/us-indicts-6-chinese-on-charges-of-stealing-trade-secrets/2015/05/19/f11fd35e-fdd8-11e4-805c-c3f407e5a9e9_story.html?utm_term=.044e53d1433e (Obama administration)
    https://www.fbi.gov/news/testimony/combating-economic-espionage-and-trade-secret-theft (Obama administration)
    https://www.economist.com/business/2013/03/16/can-you-keep-a-secret (Obama administration)
    http://time.com/106319/heres-what-chinese-hackers-actually-stole-from-u-s-companies/ (Obama administration)
    https://www.csoonline.com/article/3198664/security/china-continues-to-steal-high-tech-trade-secrets.html (Trump administration)
    https://money.cnn.com/2018/03/23/technology/china-us-trump-tariffs-ip-theft/index.html (Trump administration)

    It wasn’t the French or the Russians or the Japanese or the Australians or the Germans or the Koreans. There was just one nation that derived its “competitive advantage” from theft. Oh, you can guess which one.

    Well, that horse is out of the barn, but maybe some cutting of ties with the thieves might be proper… even if you have to pay more than simply buying discounted stolen goods.

    1. Menzie Chinn Post author

      Bruce Hall: I don’t think any of what you wrote changes the point that if we wanted to punish the Chinese for IP theft, and get them onboard with abiding with the international IP regime, we would (1) impose the previously recommended sanctions on ZTE to the fullest, (2) ring-fence China with countries that abide by the international IP regime, and (3) stop using tariffs to punish the Chinese since they punish ourselves as well.

      So rail against the Chinese. I’m all for a tougher IP regime and a tougher set of restrictions on Chinese FDI into the US that is based on rules. But don’t go for stooopid tariffs that won’t achieve the avowed goals.

      1. Moses Herzog

        5-star comment by Professor Chinn.

        Don’t know what is so hard for Bruce and others to understand that there is an intelligent way to fight these battles. You quoted Sun Tzu before. Wow, the “Art of War” is very nuanced yes, (I have a copy in the house I read in my late teens believe it or not) but it’s not a big book. How long would it take Orange Excrement to read that if he turned off FOX “news” for one week??

        This is my version, has some awesome artwork on the inside. I always thought the cover was super cool but I don’t think you can find this cover on Amazon anymore:

        At least not “New” anyway

      2. Bruce Hall

        Menzie, I agree with your position in theory, but in practice the government of China and the government of North Korea play a similar game: promise reforms and then continue to do what they want.

        Most countries trading with China have not experienced IP theft to the level of the U.S. – even on relative terms. So, for them, getting a low price on goods outweighs a small inconvenience of IP theft. Thus “ring-fencing” is problematic. I do agree that the decision on ZTE is illogical. And, yes, tariffs do shift money away from the producer/consumer sector into the U.S. treasury, but consider that a partial offset to the tax reductions enacted early (obviously affecting some sectors more than others) and a punitive measure against China’s producers.

        When/if China really honors the principles of free trade, then tariffs are moot. Until then, China is running out of retaliatory tariffs because of the trade imbalance.

        Still, it would be a nicer world if the Chinese government simply didn’t allow or participate in that IP theft practice, but I’m not holding my breath.

        1. Anonymous

          Bruce Hall I think the US needs to be a little less high-and-mighty about IP theft. Let’s remember that no country on earth was more guilty of IP theft than the US during the 19th century. We should also distinguish between outright theft and imposing tough negotiating tactics if a company wants to do business with China. The patents and copyrights are owned by US companies, and if those companies believe it is in their interest to agree to sharing IP rights with China, that’s the business of those companies, not mine. I am not keen on having to pay higher prices just because some US company has second thoughts about agreeing to sharing IP rights. Our ridiculously long patent and copyright protections don’t help our case either. The rationale for patent and copyright protections is that they incentivize individuals and companies to come up with new products and ideas. The purpose is not to provide generations of rentiers living off perpetual royalties, but rather to provide temporary windfall rents to innovators and artists before the patent or copyright enters the public domain. Our ridiculously long (and always growing longer) IP protections end up incentivizing IP theft. We need a much better balance between IP protections and the public interest. As a taxpayer and as a consumer I don’t see any reason why I should pay more in taxes and pay higher prices just because some great-grandchild of a long dead innovator or artist doesn’t want to give up his or her gravy train.

          And if we’re really worried about IP theft, then maybe we shouldn’t have pulled out of TPP and maybe we shouldn’t be making noises about pulling out of the WTO. There are plenty of cases of inexcusable IP theft by the Chinese, but there are also plenty of what I would consider excusable cases as well. We should focus on the real problem and not the cries of unproductive rentiers.

          1. PeakTrader

            I suppose this is 2slugbaits, because he gives the same flawed arguments. So, it’s ok for China to do wrongs in the 21st century, because other countries did it in the 19th century. That justifies Chinese theft, along with coercion. And, let’s just ignore IP laws, including counterfeiting. That should reduce R&D spending. Foreign firms want fair competition in country with 1.3 billion potential consumers, but it’s ok for Chinese firms to have a huge unfair competitive advantage, to where foreign firms benefit little or hope to benefit in the future. If China wants to play these games, other countries should respond appropriately.

          2. 2slugbaits

            PeakTrader It wasn’t just “other countries” in the 19th century; it was us. My point is that we shouldn’t be so self-righteous and moralistic about it. Counterfeiting is not the same thing as IP theft, so don’t confuse the two. And please explain the difference between tough negotiating and “coercion.” No one is forcing these companies to do business in China. They can always say “no thanks” and walk away. It’s the company’s decision whether or not it wants to trade IP rights for access, not your decision. Why is it okay for us to coerce China into accepting our bizarre IP laws but it’s not okay for China to negotiate with private companies over sharing IP?

            As to hurting R&D, you’ve completely missed the boat on this one. The key to R&D is to find the Goldilocks balance between patent and copyright laws that are too weak versus those that are too strong. When you (supposedly) took your comps, did you ever study anything on growth theory post-Romer? R&D expands on the shoulders of others, which means patents and copyrights have to have a shelf-life. I don’t have any sympathy for the Chinese when they steal recently patented ideas and copyrights; but I also don’t blame them for pirating 50 year old movies. In fact, in a case like that the Chinese are probably doing us a favor.

            foreign firms benefit little or hope to benefit in the future.

            Why should I care about whether non-Chinese firms benefit or not? A US based firm (whatever that means in a global economy) is just as alien to me as a Chinese based firm.

            other countries should respond appropriately.

            And imposing tariffs is your idea responding appropriately? Then again, I suppose you would agree with Trump in saying that withdrawing from the TPP and threatening to leave the WTO is somehow an appropriate response as well?

          3. Bruce Hall


            I think you miss the point about IP theft done by China. It isn’t about companies sharing technology with Chinese companies in order to get a share of the Chinese market. It is about Chinese economic espionage. I provided enough links to that effect.

            Simply haranguing in the world court of opinion (WTO) has proven to be futile and will continue to be futile. We’re not talking about 50-year old movies. We’re talking theft of state-of-the-art technical and trade secrets including military hardware. While tariffs may be uncomfortable for the U.S., it is part of making China feel oppressed and willing to change it’s de facto policies. Even Diane Feinstein might agree now.

            Still, I’m open to your thoughts about how the U.S. should respond to theft/forced relinquishing of technical/trade/military secrets since you believe economic reprisals are not appropriate. I can think of one: prohibit trade with China. Would that catch their attention?

          4. 2slugbaits

            Bruce Hall As I said before, there are legitimate concerns about Chinese theft of IP, but there are also some trivial and illegitimate concerns. So I’d begin by ignoring the trivial or illegitimate concerns, which means we shouldn’t concern ourselves with a lot of the copyright piracy of movies, music and other arts. We should also set our expectations at some realistic level. We’ll never eliminate IP theft entirely, so we should focus our efforts on the stuff that counts. We should also take away some of the incentives for IP theft, and one way to do that would be to reduce the shelf-life of patents. The incentives for IP theft will be greatly reduced if the value of the patent is reduced. And we shouldn’t impose costs on ourselves that exceed the competitive market value of the IP itself, which is exactly what Trump’s trade war will end up doing. But those are just general considerations and I think your question was directed towards more specific measures. So here are a few:

            (1) Theft of privately owned IP should be the primary responsibility of the owner of the IP, not the US government. As taxpayers it’s not our responsibility to make sure companies have adequate cybersecurity protecting for their IP.

            (2) Trade organizations and trade rules may not be perfect, but they’re not useless either. There are costs in flouting rules. So we should not withdraw from the WTO. If we do that, then American companies have no IP rights at all and no basis for complaining. There are lots of things about legal positivism that I don’t like, but clearly international IP rights fall squarely under the doctrine of legal positivism.

            (3) Military technology is an obvious case in which the US government has a strong interest in protecting IP rights. But here again, a lot of that technology is owned by defense contractors, not the US government. It’s a very squishy arrangement and it invites IP theft between American owned companies as well as theft by Chinese companies. I’d like to see laws that prevent defense contractors from extorting obscene rents for proprietary rights of military technology. That way the US government would have direct control over those IP rights rather than indirect control. We should also rethink the way we manage security clearances. I’ve never been convinced that we need anywhere near the number of clearances granted by the US government. As a result, the clearance review process has degraded into a rubber stamp exercise. For example, the last time I had my security clearance renewed I spent several weeks researching answers to a 47 page questionnaire. Was it really necessary for me to dig up the ship’s manifest that my great-grandmother arrived on back in the 1890s? I’m serious. It was 47 pages long. But the real kicker was that my security clearance renewal was approved less than 72 hours after I submitted it! So how much real research went into it? It’s a joke. We need fewer clearances and those that are granted need more than a perfunctory review. In any event, throughout history military secrets have always been the hardest to keep, so we need to accept that fact of life and just deal with it. Maybe we need fewer generals and more diplomats.

            (4) I’d also try and recruit as many top Chinese students as possible to come to US schools and then make it incredibly easy for them to stay here. In other words, we should pursue a deliberate brain drain program. Some will no doubt be spies, but most won’t and on balance I think we’d come out ahead.

            (5) Finally, we shouldn’t forget that the Chinese aren’t the only ones who steal IP. The Russians have a bad record too, as do the North Koreans. And so do some of our allies; e.g., Israel. And we’re not snow white virgins either.

          5. PeakTrader

            2slugbaits, again you miss the point. Why should foreign firms be put in a huge competitive disadvantage, in favor of Chinese firms?

            China wants to strengthen its firms, at the expense of foreign firms and universal laws.

            Foreign firms know China’s consumer market will be important, and they need protection from China’s abuses.

          6. Anonymous

            Also, great inventions came from America in the Industrial Revolution – Edison, Tesla, the Wright brothers, Ford, etc..

      3. Steven Kopits

        I agree with Menzie here. What problem are you trying to solve? The tool and approach should fit the problem. It’s not at all clear to me that tariffs are the right approach to address IP theft.

        By the way, China’s not the only country with whom we have had this problem. The chief culprit: S. Korea, notably with Samsung and some of the other chaebol.

        1. pgl

          Did Samsung steal Apple’s IP? AHHHHHHHHHH!

          Oh wait – Apple stole Samsung’s IP. And the attorneys get rich suing each other while the rest of us pay obscene prices for phones that cost only $200 to make.

          Stealing IP is BS. These companies steal our paychecks with their obscene monopoly power.

  13. PeakTrader

    From article – core complaint:

    “1. China has made it hard to produce abroad and sell to China.

    2. China has made it hard to invest in China in order to produce and sell in China if your firm isn’t Chinese.”

    Currency manipulation, forced technology transfer, subsidies, tariffs, VAT, except on Chinese exports, informal Buy China policy, etc.. There’s a lot to re-negotiate.

    1. pgl

      “From article – core complaint:”

      What article? No link? OK we know you lie 24/7 but are you also so incredibly stupid that you can’t find one single link to support your latest BS?

  14. Benlu

    Backing down in face of US pressure this time means endless backing down in future, not only in economy matters, but militarily and diplomatically. So backing down is not an option for China for now. What is left for China is to take the trade war head on but with clever strategies and tactics, such China could come out of this trade war stronger and better overall.

  15. Dwight L. Cramer

    Well, most serious international conflicts that end poorly for the side that started them involve some combination of delusional beliefs in one’s own strength, a failure to appreciate the situation of the adversary and pandering to an internal constituency. As far as I can tell, those are more problems on the American side of this conflict than on the Chinese side.

    My guess is that the Chinese response will be like an iceberg. There will be a visible retaliation sufficient to satisfy national honor (and no more), while the serious business will occur beneath the surface. Hard to say exactly what form those repercussions will take (I’ll bet they are both hard and soft, long term and short term). And the SS Trump Titanic will be lucky to limp back into port, decks awash.

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