What a Trade War with China Would Mean

Kevin Felts political commentatorWhat would a trade war with China mean?  It would mean the collapse of the Chinese economy.

It has been proven historically, time and time again, Communist do not innovate.  Neither do slaves innovate.

Where does innovation come from?  Free people and mainly from a capitalist economy.

Why don’t Communist innovate?  Because their inventions belong to the government.  As a result, there  is no financial incentive for people living under a communist, or oppressive, regime to innovate.  As a result, China is totally dependent upon what the people of the United States create.

What would happen if U.S. based companies were forced to move their factories back to the U.S.?  The economy of China would collapse.  Unemployment would skyrocket, and there would be wide-spread civil unrest.

Civil Unrest

Historically, how has the Chinese communist government responded to civil unrest?  The people are oppressed with military might.  It has been shown time and time again China will use the military to control their people.

What does China want to avoid at all cost?  Civil unrest.

Over the past few decades there has been a demographic shift in China with millions of people moving from rural areas to the cities.  This means millions of people who will not be able to afford rent, not be able to afford food, and possibly, millions of people protesting in the streets.

United States shifting its manufacturing base from China back to the United States provides jobs for Americans, and will upset the status quo in China.

Anyone remember the Tiananmen Square protests of 1989? Take those protest and multiple them by dozens, if not hundreds, and that is what China is faced with.

The way China keeps their people from protesting is by keeping them working.  Working at factories of U.S. based companies.

In other words, a trade war with the United States could possibly result in riots and protest among Chinese working class families.  The Chinese government would respond with military force, which would be condemned by the United Nations.

Made In U.S.A.

Regardless of what happens in China, the people of the United States will continue to create new products.  Rather than the products being made in China, they will be made in the United States.  Then, if the people of China want the newest smart phone, they will have to buy a made in the U.S.A. product.

What about cost?  There will be some inflation adjustments.

Keep in mind wages have been suppressed since the 1970s.  The buying power of a family in 2018 is less than the buying power in 1978.

There use to be a time when dad could work, and the family could afford to buy a home, car, and go on vacations.  Those times are long gone and have been replaced by two income families struggling to even pay rent.

What changed between the 1960s and the 2010s?  Free trade devastated the middle class.

There has to be an inflation adjustment which will put money back in the hands of working class families.  Prices would go up, and so would wages.  In the end, things will balance out.

Stock Market

When Wall Street speaks most people listen.  However, their reactionary hysteria on inflation is overrated.

The more money Wall Street makes, the less money working class families have in their pockets.  This is why companies move to China and exploit low wage labor.  Wall Street gets to keep the money saved from offshoring.

American worker cost $30 an hour, benefits included.

Chinese worker cost $5 an hour with no benefits.

Who do you think keeps the difference?  Wall Street does.

When the factories come back there will be a shift in wealth from Wall Street to the American worker.  That shift in wealth has Wall Street worried.  It means no more record profits as more money will go to the middle class.

Final Thoughts

A trade war with China has been decades in the making.  After President Nixon restored relations with China, the flood gates opened and companies raced to offshore.  Sooner or later something had to change.

The people voted for Donald Trump because he promised real hope and change.  The people were tired of business as usual and we saw Donald Trump as a break from the business as usual mentally of career politicians.

If a trade war does break out between the United States an China, the losers will be China and Wall street, while the winners will be working class families.