January 2, 2017
The Alternative View:
Trump Administration China Policy:
Heading For A Stronger Trade Relationship
On December 22, CNH principal Michael Boyd was interviewed by China National Television, CCTV-America, regarding the potential fallout from strong comments from President-elect Donald Trump on trade with China. The consensus is that we may be in for a trade war with China.
Looking at the trends in place in regard to future changes in the economic base of both nations, that’s very unlikely. Some public posturing and on-the-surface acrimony, probably. But a nasty trade war isn’t in the cards. Actually, we can look forward to a closer relationship with China. The reality is that the Chinese haven’t really had much to deal with, when it comes to a concrete US trade policy.
What US-China Policy? The US position on trade with China over the past 20 years has been sloppy, unfocused, and clearly not engineered based on mutual strength. There truly are imbalances in the relationship – virtually all due to US non-policies. For example, some US commodities such as fish have a 30%+ tariff applied by China, while the same commodity coming from China suffers no tariff-increased price at the supermarket checkout in the US.
Trump has made it clear that the US will look to level the playing field. The fact is that China has only taken advantage of a system that the US has limply allowed. China respects strength.
China also needs the US market – year 2016 represents nearly half a trillion dollars in business for Chinese companies – many of which depend on US sales.
The China Manufacturing Advantage Is Eroding. Another trend that was outlined at the 1st Annual China-US Aviation Opportunities Symposium, held by Boyd Group International in 2015, was that the main advantage of the Chinese manufacturing industry – low labor cost – is being rapidly eroded. Chinese companies are shifting to high-efficiency robotics, which are not labor-intensive. But a robotic factory in Guangzhou has no cost advantage compered to one in Columbus, Mississippi. One latest example is the decision by the largest manufacturer of auto glass moving a factory from Guangdong to Ohio. That wasn’t done just as a gesture to Trump: it was based on solid business realities.
Point: the trade relationship with China has been ignored for years. Now, with major technological shifts facing the Chinese manufacturing industry, and the implementation of a focused US policy, the outcome will be a much stronger China-US trade relationship.
China respects order and strength, which are terms that don’t describe past US administrations in regard to mutual trade arrangements.
Click here to see Mike Boyd discuss these points on China National Television, CCTV-America.