Winning or losing Sino-American trade war imposes different risks and costs on the antagonists

Winning or losing the Sino-American trade war appears to impose different risks and costs on the main antagonists, China's President Xi Jingping and US President Donald Trump.

Normally, we associate "loss of face" as a Chinese preoccupation, but in this case, defeat in the trade war stands to be catastrophic for the American presidency of Donald Trump, while losing for President Xi would be far less costly to himself and the world.

But the world of Donald Trump, with the press in the media, academic, bureaucratic legions open ever-ready to bring him down, surviving failure, seems to be the remotest of remote possibilities

And now, with his usual allies in the business community, particularly those engaged in trade, turning against him because of the tariffs, their complaints are greatly amplified by a hostile media, with academic and negative bureaucratic studies piling on with gloomy predictions of their own perhaps more pressure than his already battered presidency can take.

What could make this good news for President Trump is a quotation from Sun Tzu's "Art of War" relevant to US leader's do-or-die situation. Or as Sun Tzu describes it: "Confront [one's soldiers] with annihilation and they will then survive; plunge them into a deadly situation and they will then live and be able to strive for victory."

No one needs telling that whatever President Xi wants the media, academics and bureaucracy to say - or not say - they will comply. But before describing the Chinese leader's strengths and vulnerabilities, let us further examine the unenviable position of President Trump.

His are querulous people, quick to embrace the prospect quick victory but impatient if not delivered. Perhaps Trump was unwise to suggest that tariffs against Chinese goods would bring about a desired trade deal, as if tariffs were quick-acting antibiotic pills rather than salvoes of artillery to be received in a spirit of reciprocity. Not only were Americans surprised that tariffs are a two-way street and the Chinese could fire back, but that one's own tariffs had costs of their own.

The Washington Post's portentous headline sets the hostile media tone, "Democracy Dies in Darkness" for the harsh words to come: "Companies in furious bid to prevent new China tariffs".

It all sounds so dire - as it is meant to - but one finds the substance of complaints is gossamer thin. If one looks, but one often doesn't being satisfied with the gloom of the headline.

Said Ohio Leading Lady brassiere maker Mark Corrado: “If we are forced to move production from China, it will take a long time to make sure that new factories will make the garment correctly and can get the proper materials.”

Said Western Washington University economics professor Edward Alden: “The level of concern in business is going up, and the willingness to challenge the president more directly on this issue is increasing.”

While this is a mere sample of the flood of moans and groans coming to the US Trade Representative, it is typical of the substance of such complaints.

So what if a US brassiere maker is going to take a long time to get back to normal. Big deal. As for professor's "level of concern in business is going up" well double big deal! This in an inconvenience, hardly a national crisis.

Other stuff sounds more dire because it comes from more important sources. Investment bank Morgan Stanley has cut its outlook for global growth, saying continued uncertainty over the US-China trade war was having a “more pronounced” effect on business confidence and outlook for economic expansion.

Similarly, the International Monetary Fund (IMF) said the global economy had hit a “rough patch” and trade had slowed significantly. But IMF expects global growth to "strengthen somewhat, but the risks to that outlook remain serious."

Again, how serious is that? First they are based on predictions which are all too frequently wrong. And in these two cases, they are not that gloomy, but still provide enough downturn sentiment to provide material for a negative headline to condemn Trump.

What it boils down to is that for Trump to win, he must provide an overwhelming victory that the media and the academics can ignore, but cannot characterise as a defeat. He can expect nothing more, just as the media ignored or mimimised coverage his momentous defeat of ISIS in Syria and Iraq that was a year before the jihadhists were banging on the gates of Baghdad, having been reduced to a guerrilla band in a three-way civil war in Libya.

In absolute terms the US economy pound for pound is just so much bigger and more resourceful than China's. While that Ohio bra maker will have trouble setting up shop in Vietnam or Indonesia he will suffer no more than his rivals, but President Xi will have lost a factory, perhaps many factories, exporting those low-skilled jobs to rival countries and thus threatening domestic social peace.

Add to that, HP and Dell have both decided to shift production out of China. Meanwhile there were statements in Beijing on further easing of restrictions on foreign ownership of a wide range of businesses from finance companies to city gas lines.

In May, the Trump administration escalated the tariff rate on US$200 billion worth of Chinese imports from 10 per cent to 25 per cent. China responded by imposing increased tariffs on about $60 billion in American goods. But US tariffs of 25 per cent on $250 billion of Chinese imports are still in place, and are likely to remain until a deal is made.

Thus, President Trump must keep the level of squawking down to a minimum, a tough job given the homeopathic quantities needed to make a fuss in the supersensitive West. Moreover, he faces special difficulties this year. If he cannot keep the economy growing, keep the markets up and unemployment down, he faces trouble as he heads into an election year.

The trade problem is that tariffs and been more bark than bite, but as time goes on, the bite will become more evident as well the squawking. True, US port tonnage, barometric reading of the American China trade, has been good, hitting historic highs last year as shippers made the most of the low-tariff environment by shipping as much as their warehouses could hold.

But that was last year. This year, it's different. The Port of Long Beach (POLB) has experienced a six per cent decrease in containerised cargo volumes, while the Port of Los Angeles (POLA) has experienced a 5.2 per cent increase. Top executives at both ports say that the trade dispute with China is impacting their cargo volumes, noting that the largest cargo traffic gains have been in the empty shipment of containers overseas, rather than in actual goods movement.

Exports to China between both ports have decreased by 28 per cent this year. Nationwide, that figure is 25 per cent.

Said Long Beach port: "Tariffs do create uncertainty for the industry and stakeholders as a whole."

Said LA port: “What we’ve seen is that imports to the Port of Los Angeles are virtually even with what they were last year. And exports have declined marginally, just a little bit less than two per cent.

As the trade war continues, rather like a gladitorial contest in the Roman Colesium, we have two warriors with different weapons, facing different problems with differing advantages and disadvantages.

It will take some time to determine how much one is prepared to lose for what can be gained. One can only hope the contest is decided soon and one does not demand too much of the other.