by Bei Hu December 28, 2016, 9:12 PM EST Trade war a ‘distinct possibility’ in 2017, James Wang writes China better placed to use state resources to aid exporters China would outlast the U.S. in a trade war, which is a “distinct possibility” next year after President-elect Donald Trump takes office, a commentator wrote in the $1 billion Pine River China Fund’s investor letter. China’s government would be better placed than the U.S. to marshal state resources to cushion the impact on exporters, wrote James Wang, a City University of Hong Kong professor who pens a monthly commentary for the fund. Privately-owned Chinese exporters would be worse hit than state-controlled peers because they have less political clout in Beijing, he said. “By design, decision-makers in a democracy face difficulties coordinating a relief effort and must eventually face a political backlash from impacted domestic producers,” Wang wrote. “On this basis, the Chinese may have more runway to play the long game in a trade war.” During his campaign, Trump pledged to brand China a currency manipulator and impose a 45 percent tariff on Chinese imports. His protocol-breaking phone call with Taiwan President Tsai Ing-wen and his attacks on China on Twitter have sparked further friction between the world’s two biggest economies before he takes office next month. Trump’s electoral victory capped a year of rising populism that Wang likened to the aftermath of World War I, which ushered in an age of discontent and protectionism. Diffuse Power “The balance of power worldwide is much more diffuse compared to the early 20th century, and players like China and India have emerged to create new political centers of gravity,” Wang wrote. “However, as economic and political paralyses spread across the developed world, the most likely outcome is a trade war.” Pine River China Fund is being spun off into a separate Hong Kong-based company next year, led by its current manager Dan Li and minority-owned by Pine River. Punitive tariffs on China’s shipments to the U.S. would knock 3 percent off China’s gross domestic product next year, triggering a hard landing for the nation and hurting the global economy, Goldman Sachs Group Inc. China equity strategist Kinger Lau said in November. Chinese exporters of “Wal-Mart type” goods, including clothing, furniture, footwear and textiles would be hurt, while the impact of tariffs on telecommunications equipment is less obvious, as the lion’s share of profit from an iPhone accrues to Apple Inc., instead of its Chinese suppliers, Wang wrote. In retaliation, China could potentially withhold aircraft orders from Boeing Co. as well as curb automobile and agricultural imports from the U.S., he said. In the U.S., such a trade war could stimulate inflation and dent domestic consumption, he added.
because billion dollar funds are always right? last i checked many of them can't break even for the year
Trade war would hurt both the US and China. Inflation would be painful to the US but a significant dent to Chinese growth prospects would cause markets and house prices to crash and really hurt the Chinese middle class. This could result in a significant drive for politcal change in China or strong nationalist feelings and start another cold war!
Exactly. When you're a net importer (US), you don't have nearly as much to lose in a trade war as a net exporter (China).
From a US point of view if Trump & Co. had any sense they would just opt for a level playing field of trade tariffs not some sort of supremacy. The rest of the world may well be forced to take sides in this coming disaster. Trump should not take for granted that the EU and others will plump for the US side, especially after his rude remarks. Perhaps he has Turettes disease and can't help it but He comes across as a rude and aggressive person. It looks like 4 coming years of a nasty person undoing the goodwill toward the US. Even US posters in the forums are adopting his uncouth posturing.
Take a look at these posts if you think I am wrong. http://www.trade2win.com/boards/foyer/172688-elitetrader-vs-trade2win-12.html
Is Trump that stupid to start a trade war with China? Was he talking about it just to get some votes? If he does, this will not be good for either side. China's biggest customer is the US. It is in their best interest to keep their biggest customer happy, but of course no matter how big your customer is, if your customer keeps slapping you in the face, you're going to say enough is enough. China has treasuries, a huge weapon at their disposal. They can also unblock their currency too.