This guy in the White House is playing on a level the others aren't even aware of, much less equipped to deal with. While they're stretching to be the tallest among pygmies in the race to give unfunded @#$% away to their illegal 'constituency', if Trump even acknowledges them, its in the form of tweaks -
Sleepy Joe, Nervous Nancy, Pocohauntas, Alfred E. Newman, etc. I can't wait for Kamala's (she who sleeps 'around') Trump name. Flutist? But I digress.
So, if you were to look at the specter of China surpassing us in GDP sometime soon (again, beyond the oblivion of the pygmies), and what to do about it, what sort of strategery might you devise? Massive segments of global manufacturing and their supply chains are either in China, or headed to China. We aren't manufacturing @#$% because the incentives to do so lie elsewhere. Returns on American capital remain overseas because they're double taxed... etc. etc. etc.
So they guy in the White House leans on his party's majorities to pass tax cuts. We all know how that went. Then he leans on American multinationals to bring manufacturing home because the incentives are now here. Then he renegotiates 'trade deals' so they aren't entirely against American interests. And in the process he challenges China to reexamine how they might trade with us more equitably. They balked. He raised tariffs. We all know how that went. Some might argue 'brilliantly'. Some might not. But if you look carefully, even squint, you might see a strategery afoot.
Capitalists are good readers of tea leaves. And being the greedy @#$%s they are, they position themselves to advantage. So back to that GDP thing, what happens to China's GDP as manufacturing and supply chains bolt to more favorable positions? What happens to China's economy, which is substantially built on employed Chinamen? And what happens to holders of Chinese equity as these factors head south?
And 'secondarily', we have gagillions of Central Muricans coming across the border because there aren't sufficient opportunities to keep them on the other side. Create more jobs south of the border? Mmmm. Could work.
This fellow that lives in the White House is pretty sharp. The pygmies - not so much. The Donald is playing 5D Chess and they're campaigning in Mexico. Visualize that.
Should this be posted under 'winning'?
https://www.scmp.com/economy/china-...war-accelerating-biggest-shift-trade-cold-war
US-China Feud Is Accelerating The Biggest Shift In Trade Since The Cold War, Away From Globalisation
Finbarr Bermingham | Published: 3:00am, 6 Jul, 2019
- Trend described as ‘deglobalisation’ and ‘balkanisation’ is leading to shorter supply chains as companies try to keep up with more sophisticated consumer demand
- As firms rush to avoid Donald Trump’s tariffs and other geopolitical volatility, the trend is accelerating, leading to a complete shift in global trade
From an office in Tijuana, Mexico, Roberto Durazo has been capitalising on one of the biggest shifts in global trade since the end of the cold war.
His company, Ivemsa, has been helping dozens of companies move their factories out of China and other parts of Asia and into Mexico to make goods to be sold domestically and in the United States. Operating in what is known as the “shelter industry”, firms like Ivemsa help international companies operate in Mexico without having to maintain a legal entity.
“We have talked to many companies from Asia who are interested in Mexico as a platform to manufacture and send their products north to the US – that's really where the market is,” Durazo said.
“A lot of automakers are doing business here, for example Kia Motors from South Korea established a big facility in Mexico. And they moved at least 30 of their suppliers from Asia into Mexico. Their key suppliers followed them because if they don’t, they may lose the business.”
This example illustrates a wider movement that predates the trade war between China and the US, but one which experts now say is irreversible. After decades in which globalisation seemed to be an unstoppable force, the trade war is accelerating a complete transformation of global trade towards a more fragmented model, and Durazo is operating at ground zero.
The post-1990 trend towards globalisation was driven by the integration of cheap labour from emerging markets such as China, India and former Soviet Union bloc nations into the world economy. This benefit was eroded as these low-cost hubs developed and their factory workers demanded better compensation.
A McKinsey Global Institute study, released this year, found that “low skill labour is becoming less important as a factor of production. Contrary to popular perception, only about 18 per cent of global goods trade is now driven by labour-cost arbitrage”.
In the “first phase of globalisation, the age of mass manufacturing”, Seong said, companies could ship more bulk products from A to B, but customers now have more sophisticated demands for products such as clothing and electronics. The rise of highly customised products has meant that if manufacturers want to react quickly to changes in consumer demand, a shorter supply chain is imperative.
The political risks and financial costs of the trade war over the past year have only served to accentuate what some experts are calling a “balkanisation” or “deglobalisation” of supply chains, with companies seeking to produce closer to their consumer markets to avoid uncertainty in the changeable trading environment, as well as to mitigate the costs of tariffs.
“Companies globally have been looking at a trend of regionalism. So you're getting investments into Eastern Europe to supply the [European Union], and investments going into Mexico to be close to the US,” said John Evans, managing director of Tractus Asia, which also works with businesses relocating from China.
At the same time, locations that were previously hotbeds of low-cost manufacturing are becoming vibrant consumer markets. As millions join the ranks of the middle classes in China, India and Southeast Asia, many companies are choosing to have localised supply chains to service them.
In China, while manufacturers have been leaving in their droves, those who wish to continue to service the 1.4 billion consumer market are keeping their production close to home. This is evident when looking at the car market, where companies such as Changan Ford produce in huge numbers in China to satisfy domestic demand. However, these plants export very little to the US, for example.
“Automobiles that [were previously] exported to China are increasingly produced within the country in order to avoid the tariffs. The tariffs are making companies not import vehicles to the market, but produce domestically,” said Bill Russo, the founder of the Shanghai-based consultancy Automobility.
Lakshman Achuthan, co-founder of the Economic Cycle Research Institute (ECRI), points to the decline in exports as a proportion of gross domestic product (GDP) in China and India, which are likely to provide the main engines of global growth in the coming decades, “partly because of the rise of the domestic consumer, as well as the growing importance of the non-manufacturing sector”.
“Indeed, exports’ share of GDP has dropped from over 37 per cent at the end of 2006 to under 20 per cent today in China, and from nearly 29 per cent seven years ago to about 20 per cent in India. These trends will not soon reverse course,” he said. Regional hubs will benefit from this, as is the case with Mexico and Vietnam, which are often described as the “winners” of the first year of the trade war.
Figures recently released by the US Census Bureau showed how much the Mexican manufacturing base is being swollen by the trade war. In May, the US trade deficit with Mexico was the highest monthly reading on record, at US$9.6 billion, with imports from its southern neighbour soaring to more than US$32 billion over the course of the month. Meanwhile, Vietnam’s reported GDP growth for the first half of the year was 6.8 per cent, driven largely by manufacturing exports.
However, the short-term case of Vietnam differs from its long-term trajectory. Much has been made of the migration of manufacturing out of China and into Vietnam, and since the start of this year its exports to the US have surged by almost 40 per cent. This shows that many companies are using Vietnam as a means of avoiding tariffs, but that is not a sustainable solution, given that Vietnam’s capacity to support manufacturing is already at a breaking point, with land and labour prices rising fast.
Instead, Vietnam and Indonesia are viewed as a logical long-term manufacturing base for firms servicing the Southeast Asian market, especially with US President Donald Trump hanging the threat of US tariffs over Vietnam.
Meanwhile, as technology continues to develop, deglobalisation will become more ingrained. With smart manufacturing and advanced robotics, it becomes less important to tap low cost labour in distant corners of the world.
“This trend is likely to continue, but the jobs may be far fewer in number, requiring much greater education and skill levels,” said Achuthan from the ECRI. This means that should Trump succeed in bringing manufacturing back to the country, the job creation prospects will be greatly diminished.
Other innovations will also further shorten and shrink the supply chain. Electric vehicles, for instance, require fewer components than their traditional counterparts, therefore condensing the supply chain. With the advent of 3D printing, factories could theoretically print what they need locally, thereby reducing the volume of trade and deepening the lines of balkanisation.
But for now, the restructuring is still a work in progress and companies like Ivemsa and Tractus Asia are benefiting.
Ivemsa’s Durazo, however, speaks like a man who has already glimpsed the future through the eyes of demanding customers.
“A few hours over the border is nothing compared to a few weeks from Asia,” he said. “But you can imagine that for the customers, there is always the next thing. If you do it in a few hours, then you just want it in a few minutes. You do it a few minutes, they want it in a few seconds. So that is what are we facing, right?”
