Peter, perhaps you could do a column sometime regarding the proposed 60% tariffs on China. I have read that trade restrictions during the Great Depression made our economy worse and extended the Depression by years. But the global economy has changed so much since then that I am unsure what effect a 60% tariff would now have. Would it be even more disastrous now? Would it be worse for China than for the US? Is Trump proposing the tariff because he is convinced that the benefits would outweigh the negatives, and if so, do you think he is wrong?
The Smoot-Hawley Tariff is one of the more controversial measures enacted by Herbert Hoover at the start of the Great Depression. A common narrative is that the imposition of that tariff system ruptured global trade, producing dislocations not unlike what we saw during the COVID lockdown lunacy in 2020 and immediately thereafter.
As is generally true of most narratives, there is a lot of oversimplification in that narrative and thus a lot of misunderstanding. The Smoot-Hawley Tariff was not a good economic move and definitely not enacted at a great time for tariffs, but the degree to which the tariffs exacerbated the Great Depression is problematic.
It may take me a couple of weeks to pull together a deep dive on tariffs and China, but I'll see what I can work up. It is a fascinating topic (and might actually span multiple articles...it's not a simple subject!).
Yes, it seems as though it's all still on track to collapse as others and yourself discussed early in 2021.🤔🤷♀️🤐
Query- what's China's technology and telecommunications industries like in terms of survivability?
Also, as a hypothetical, if you knew that China's economy would be collapsing by 2024, where would you be expecting to see positive effects globally? As in take out China's economy who/what benefits most?
Finally, is the youth unemployment rates partially responsible for the influx of Chinese immigration seen elsewhere globally? Forced migration?.
China is the second largest economy in the world and the largest energy importer. They are a major buyer of several commodities--everything from grains to minerals to rare earths.
If China's economy completely collapses, then so does their importation of energy and all of those many commodities. That does not augur well for those who sell energy and commodities and want/need higher prices.
Iran would not do well from a China collapse. Neither would the rest of OPEC nor even Russia. Brazil would suffer as well. Depending on what happens with China's external debt, whether denominated in remninbi or dollars, it's hard to see an economic collapse in China being all that helpful to the US. At a minimum the US would be looking at another massive wave of supply chain disruptions.
I would greatly question the premise that anyone would plausibly stand to profit by China's economic collapse. There would be some geostrategic benefits--if China collapses and the US does not then the US position as global hegemon is likely secure for the remainder of this century at least--but I do not believe there would be any economic ones.
As for youth unemployment contributing to rising Chinese immigration elsewhere in the world...I would not rule it out but I do not have any hard data to confirm that hypothesis.
Great article as always. Thanks for your excellent insight.
Some thoughts:
-many unemployed youth… will it be a deciding factor for Xi taking Taiwan?
-Xi economy is toast… will it also push him into taking Taiwan ?
-we have China government on its knees soon. If anti China policies continue… can it help topple Xi/CCP?
-sadly I heard ridiculous rumours on the internet television about how China could be bailed out? Lol. Omg on that one. Crazy
-I also heard China woes may be related to a possible Trump win in 2024? Lol. On the graphs…..As Trump polls rise… China numbers sink. Lol.
China has been anti-Trump and has been behind the scenes undermining him. But they didn’t realize how their meddling world policies would contribute to their poor economic outlook? Will they finally admit world peace, financial stability, etc., helps them too?
They are pushing RFK Jr on Tik Tok like crazy. Obviously they see him as another climate change lunatic democrat that they can manipulate to their benefit. If everyone continues the green agenda to benefit China then upheaval continues. Not sure if China calculated this and if they did… they don’t care? In the long run if they control the worlds energy needs with batteries/ solar … they win! I don’t know what they are going to do.
Apparently there is an old Chinese forecast/folk tale that Xi will be the last leader. Omg I hope it’s true. Lol. Hopefully the good people of China make major changes in their government one day.
Will the dire economic picture move Xi to attempt an invasion of Taiwan? I tend to think not. Two reasons why: 1) China needs to export if they are to have any hope of economic recovery; the country simply lacks the resources to attempt autarky. 2) Taiwan, as the epicenter of the global semiconductor industry, is too important to the global economy for other countries to be blase about a Chinese invasion of the island.
As a consequence, even if China invaded Taiwan, it has almost no chance of holding Taiwan, even under the best economic conditions--which do not exist currently.
Regarding the political future of the CCP:
Whether the economic crisis metastasizes into a political crisis is impossible to predict. The CCP has a firm grip on the reins of power, but that also means there is an expectation they will resolve the economic crisis. If the CCP is seen as having lost control over the economic situation, it is difficult to see how they retain political credibility and thus political power, but whether that happens or when are questions we cannot answer in advance.
Regarding the benefits of world peace and prosperity to China:
We should always be mindful that what benefits a nation and a people is not always seen as a positive by the ruling elites. That's true here in the US, and it is doubly so in China. A global economy which puts pressure on China to liberalize its economy will always be rejected by the CCP, for the simple reason that a more liberal economic order requires a more liberal political order. I do not see the CCP ever supporting a more liberal political order.
Great data, and you point out several aspects of the situation that other writers have not, such as the effect of shipping costs on China. I think China’s developing nightmare will be one of the most fascinating and important events of the coming year. Think of the geopolitical implications! China will become the textbook case for why command economies cannot work, or, as you’ve wisely written, “you can’t push a string”. Other countries will back off from top-down economic strategies. The Belt and Road Initiative could completely unravel, maybe even backfire in some countries. Iran will not have an economically-strong silent backer. And if China falls off a cliff, that could be a saving grace for the US economy, as investment comes to us instead of to China.
Part of me wants to laugh. The CCP wants to REQUIRE state-owned firms to bring finds held overseas and put them into the Chinese stock market! Are they nuts? Money will go down a bottomless hole, and the heads of these firms will lose pretty much everything. Does the CCP not realize what kind of revolt that could provoke? What kind of financial chaos?
I don’t wish any suffering on the Chinese people, but wow, you have not overstated your case, Peter. This really is going to be bad!
The great danger to the global economy is a complete unraveling of the Chinese economy.
China is the world's leading energy importer. A complete collapse by China (which is not an impossibility) would roil global energy markets. Oil prices could collapse--which would be bad for US oil companies. A loss of Chinese exports would upend most of the world's economies.
If China exports its deflation the rest of the world will suffer significantly.
True, but it’s a finite world, and at least in some ways the US may benefit RELATIVE to other countries. If you had half a trillion dollars to park somewhere, the US markets might seem more stable than China, Russia, Europe, South America, and so on. I’ll bet the major players of the world have already positioned themselves to benefit from China’s decline and/or instability.
Which brings me to another question I’ve been wanting to ask you, regarding Argentina. If Milei is all he seems to be, there could be an economic miracle in Argentina - although in my more cynical moments I think the situation is David vs.Goliath x 10,000. So, if China is completely tanking during the coming year, do you see that as being any help to Milei? That is, Argentina’s citizens will see, in real time, how disastrous command economies become, and this will bolster them during the initial hard times as their economy transitions away from socialism....
Peter, perhaps you could do a column sometime regarding the proposed 60% tariffs on China. I have read that trade restrictions during the Great Depression made our economy worse and extended the Depression by years. But the global economy has changed so much since then that I am unsure what effect a 60% tariff would now have. Would it be even more disastrous now? Would it be worse for China than for the US? Is Trump proposing the tariff because he is convinced that the benefits would outweigh the negatives, and if so, do you think he is wrong?
The Smoot-Hawley Tariff is one of the more controversial measures enacted by Herbert Hoover at the start of the Great Depression. A common narrative is that the imposition of that tariff system ruptured global trade, producing dislocations not unlike what we saw during the COVID lockdown lunacy in 2020 and immediately thereafter.
As is generally true of most narratives, there is a lot of oversimplification in that narrative and thus a lot of misunderstanding. The Smoot-Hawley Tariff was not a good economic move and definitely not enacted at a great time for tariffs, but the degree to which the tariffs exacerbated the Great Depression is problematic.
It may take me a couple of weeks to pull together a deep dive on tariffs and China, but I'll see what I can work up. It is a fascinating topic (and might actually span multiple articles...it's not a simple subject!).
Yes, it seems as though it's all still on track to collapse as others and yourself discussed early in 2021.🤔🤷♀️🤐
Query- what's China's technology and telecommunications industries like in terms of survivability?
Also, as a hypothetical, if you knew that China's economy would be collapsing by 2024, where would you be expecting to see positive effects globally? As in take out China's economy who/what benefits most?
Finally, is the youth unemployment rates partially responsible for the influx of Chinese immigration seen elsewhere globally? Forced migration?.
China is the second largest economy in the world and the largest energy importer. They are a major buyer of several commodities--everything from grains to minerals to rare earths.
If China's economy completely collapses, then so does their importation of energy and all of those many commodities. That does not augur well for those who sell energy and commodities and want/need higher prices.
Iran would not do well from a China collapse. Neither would the rest of OPEC nor even Russia. Brazil would suffer as well. Depending on what happens with China's external debt, whether denominated in remninbi or dollars, it's hard to see an economic collapse in China being all that helpful to the US. At a minimum the US would be looking at another massive wave of supply chain disruptions.
I would greatly question the premise that anyone would plausibly stand to profit by China's economic collapse. There would be some geostrategic benefits--if China collapses and the US does not then the US position as global hegemon is likely secure for the remainder of this century at least--but I do not believe there would be any economic ones.
As for youth unemployment contributing to rising Chinese immigration elsewhere in the world...I would not rule it out but I do not have any hard data to confirm that hypothesis.
Great article as always. Thanks for your excellent insight.
Some thoughts:
-many unemployed youth… will it be a deciding factor for Xi taking Taiwan?
-Xi economy is toast… will it also push him into taking Taiwan ?
-we have China government on its knees soon. If anti China policies continue… can it help topple Xi/CCP?
-sadly I heard ridiculous rumours on the internet television about how China could be bailed out? Lol. Omg on that one. Crazy
-I also heard China woes may be related to a possible Trump win in 2024? Lol. On the graphs…..As Trump polls rise… China numbers sink. Lol.
China has been anti-Trump and has been behind the scenes undermining him. But they didn’t realize how their meddling world policies would contribute to their poor economic outlook? Will they finally admit world peace, financial stability, etc., helps them too?
They are pushing RFK Jr on Tik Tok like crazy. Obviously they see him as another climate change lunatic democrat that they can manipulate to their benefit. If everyone continues the green agenda to benefit China then upheaval continues. Not sure if China calculated this and if they did… they don’t care? In the long run if they control the worlds energy needs with batteries/ solar … they win! I don’t know what they are going to do.
Apparently there is an old Chinese forecast/folk tale that Xi will be the last leader. Omg I hope it’s true. Lol. Hopefully the good people of China make major changes in their government one day.
Regarding Taiwan:
Will the dire economic picture move Xi to attempt an invasion of Taiwan? I tend to think not. Two reasons why: 1) China needs to export if they are to have any hope of economic recovery; the country simply lacks the resources to attempt autarky. 2) Taiwan, as the epicenter of the global semiconductor industry, is too important to the global economy for other countries to be blase about a Chinese invasion of the island.
As a consequence, even if China invaded Taiwan, it has almost no chance of holding Taiwan, even under the best economic conditions--which do not exist currently.
Regarding the political future of the CCP:
Whether the economic crisis metastasizes into a political crisis is impossible to predict. The CCP has a firm grip on the reins of power, but that also means there is an expectation they will resolve the economic crisis. If the CCP is seen as having lost control over the economic situation, it is difficult to see how they retain political credibility and thus political power, but whether that happens or when are questions we cannot answer in advance.
Regarding the benefits of world peace and prosperity to China:
We should always be mindful that what benefits a nation and a people is not always seen as a positive by the ruling elites. That's true here in the US, and it is doubly so in China. A global economy which puts pressure on China to liberalize its economy will always be rejected by the CCP, for the simple reason that a more liberal economic order requires a more liberal political order. I do not see the CCP ever supporting a more liberal political order.
Great data, and you point out several aspects of the situation that other writers have not, such as the effect of shipping costs on China. I think China’s developing nightmare will be one of the most fascinating and important events of the coming year. Think of the geopolitical implications! China will become the textbook case for why command economies cannot work, or, as you’ve wisely written, “you can’t push a string”. Other countries will back off from top-down economic strategies. The Belt and Road Initiative could completely unravel, maybe even backfire in some countries. Iran will not have an economically-strong silent backer. And if China falls off a cliff, that could be a saving grace for the US economy, as investment comes to us instead of to China.
Look at this article from yesterday’s Epoch Times: https://www.theepochtimes.com/opinion/will-the-ccp-save-chinas-stock-market-5579541?utm_source=ref_share&utm_campaign=copy
Part of me wants to laugh. The CCP wants to REQUIRE state-owned firms to bring finds held overseas and put them into the Chinese stock market! Are they nuts? Money will go down a bottomless hole, and the heads of these firms will lose pretty much everything. Does the CCP not realize what kind of revolt that could provoke? What kind of financial chaos?
I don’t wish any suffering on the Chinese people, but wow, you have not overstated your case, Peter. This really is going to be bad!
The great danger to the global economy is a complete unraveling of the Chinese economy.
China is the world's leading energy importer. A complete collapse by China (which is not an impossibility) would roil global energy markets. Oil prices could collapse--which would be bad for US oil companies. A loss of Chinese exports would upend most of the world's economies.
If China exports its deflation the rest of the world will suffer significantly.
True, but it’s a finite world, and at least in some ways the US may benefit RELATIVE to other countries. If you had half a trillion dollars to park somewhere, the US markets might seem more stable than China, Russia, Europe, South America, and so on. I’ll bet the major players of the world have already positioned themselves to benefit from China’s decline and/or instability.
Which brings me to another question I’ve been wanting to ask you, regarding Argentina. If Milei is all he seems to be, there could be an economic miracle in Argentina - although in my more cynical moments I think the situation is David vs.Goliath x 10,000. So, if China is completely tanking during the coming year, do you see that as being any help to Milei? That is, Argentina’s citizens will see, in real time, how disastrous command economies become, and this will bolster them during the initial hard times as their economy transitions away from socialism....