Many investors fear that the US-China trade dispute will inflict long-lasting damage on the US, but economist Gary Shilling, PhD disagrees. “People say nobody wins trade wars. Yeah, in the short-run you do not, but in the long-run…the US will be better off,” Dr. Shilling asserted in an interview with Business Insider published early this week.
“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..If we weren’t 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,” Dr. Shilling added.
His comments come as other observers see growing problems for the economy and the markets that are likely to be worsened by protracted trade conflict.
Dr. Shilling notes that China engages in “underhanded” trade practices that should be challenged. “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.
The bottom line, Dr. Shilling says, is that the US has ample leverage to gain 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 am not predicting that. I think they probably will settle and China will begrudgingly give ground. They will import more US goods, they will ease up on required tech transfers, steal less of it. They are not going to change their views entirely, but I think under pressure, they probably will give way and we will end up winning the trade war,” he predicts.
Ed Yardeni is an economist with a similar outlook. “This trade escalation is probably going to be more of a negative for China than for it is for the United States. They desperately need a deal much more than we do,” Dr. Yardeni said recently. “I’m convinced that our side is pushing for fairer trade with fewer trade barriers, not higher tariffs, which Trump is using as a tactical negotiating tool,” he wrote in column for MarketWatch in September 2018.
Dr. Shilling is well-known as an economic and financial commentator with a contrarian bent, as a columnist for Forbes since Y 1983, and as the author of, or contributor to, several books. Among his most notable forecasts: in the late 1970’s, contrary to a widespread belief that the high inflation would persist for many years, making tangible assets the best investment options, Dr. Shilling anticipated that policymakers would bring inflation under control, making stocks and bonds better alternatives.
Any one can learn to find low-risk, high-potential investment opportunities in an uncertain market, so long as they have the right skill set no matter which way the market turns.
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