President Trump is Winning the ‘Trade War’, US is Better Off

President Trump is Winning the ‘Trade War’, US is Better Off

FLASH: The buyer has the ultimate power, the US is the buyer.

Economist Gary Shilling predicts that not only will President Trump win the ‘trade war’ with China, but in the long run the US will be better off.

“People say nobody wins trade wars. Yeah, in the short-run you don’t, but in the long-run…the U.S. will be better off,” Dr. Shilling said recently.

“When you’ve got plenty of supply in the world, and I think you do. It’s the buyer that has the upper hand not the seller. The buyer has the ultimate power and who’s the buyer? US is the buyer, China is the seller,” he said.

“If we were not buying all those consumer goods from China…where would China sell them? They have no other place to sell them, and in the meanwhile, China’s growth is slowing,” said Dr. Shilling.

Dr. Shilling, urged President Trump to continuing challenging China’s “underhanded” trade practices. “They [China] basically have not fulfilled their promises, they have not opened up their technology, they’re not opening up to our investments, they steal our technology, they demand tech transfers for companies that want to operate in China and so on,” he said.

Dr. Shilling predicts President Trump will eventually win long-overdue concessions from China.

“They [President Xi of China and President Trump] could go to the mat and you could get a really nasty, all-out trade war and a serious global recession. I’m not predicting that. I think they probably will settle and China will begrudgingly give ground. They will import more US goods, they’ll ease up on required tech transfers, steal less of it. They’re not going to change their views entirely, but I think under pressure, they probably will give way and we’ll end up winning the trade war,” he predicts.

Meanwhile, profits for China’s industrial firms shrank in April as slowing manufacturing activity halted the previous month’s surge, putting more pressure on policymakers to step up support for an economy hit by a bitter trade war with the United States, Reuters reported.

Earnings at China’s Key manufacturing sector have been declining since November last year, with the exception of March, as both domestic and global demand slackened.

Industrial profits dropped 3.7% Y-Y to $74.80-B in April, partly due to a high base of comparison in the previous year, according to data published by the National Bureau of Statistics (NBS) Monday. That compared with a 13.9% surge in March, which was the biggest gainer in 8 months.

Zhu Hong of the statistics bureau said in a statement the March results benefited from companies buying industrial goods ahead of a VAT cut. The firms then scaled back on purchases in April in a blow to profits.

For the 1st 4 months, industrial firms notched up profits of RMB Yuan 1.81-T, down 3.4% from a year earlier, compared with a 3.3% drop in Q-1 of this year.

The contraction in profits was in line with the weak growth in industrial output in the January-April frame. Weak fixed-asset investment has also stoked worries about demand as have new factory orders, which remained sluggish in April, while exports have fallen on a sharp drop in shipments to the United States.

China’s trade frictions with the United States escalated suddenly this month, reversing the apparent progress in dialogue seen earlier this year, as U.S. President Trump raised tariffs on $200-B worth of Chinese goods and threatened to slap tariffs of up to 25% on another $300-B Chinese imports.

Editor’s Note: A. Gary Shilling is President of A. Gary Shilling & Co., a New Jersey consultancy, a Registered Investment Advisor and author of “The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation.” Some portfolios he manages invest in currencies and commodities.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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