Made in China

Look at your belongings—much of what you own is made in China. The Middle Kingdom is the world’s factory, and the United States is the supermarket—in this simplistic view of planetary order, Europe is the museum.

In particular, China is the semiconductor capital of the world, which makes it a powerhouse in tomorrow’s digital society.

The orang-u-turn decided to show America how a deal is really done, taking on the tariff war to please an electorate that depends on all things Chinese—the poor and disenfranchised in the States buy the cheaper goods, hardly any of which are made in the USA.

China stands accused of unfair trade practices—largely driven by government support or participation in business. Europe and the US, on the other hand, draw a clear line between private and public sector, and fight monopolies and cartelization.

At the heart of the dispute is the enormous trade deficit between the US and China, but also the obligation of foreign companies to disclose trade secrets in order to operate in the Middle Kingdom—like Robert Johnson at the crossroads, US corporations sell their soul to the devil so they can play guitar.

Americans see all these aspects as unfair, and the Trump narrative of bringing back blue-collar jobs is the Eldorado, but quite how this is to be done is, to quote Churchill, ‘a riddle, wrapped in a mystery, inside an enigma’. A typical factory worker in Shenzen receives 2725 yuan per month, or around four hundred bucks, while their equivalent in the US gets $22,425 per year—a monthly salary of almost nineteen hundred bucks.

If the labor cost of product manufacture increases five-fold, you can expect a price hike. But analysts worked out that the cost difference of a US-made iPhone would only be a hundred bucks if all parts were made in the States.

If this were a job-rich activity, the difference would be much higher, so these numbers tell the story in one word—robots.

So, no new jobs. But those hundred bucks are make-or-break when it comes to price wars, and a lead weight for folks already below the waterline.

Semiconductors R Us. Computer City in Guangzhou, China.

When it comes to the garment industry, or other labor-intensive manufacture, the problem differs—here, blue-collar America would be out of their new-found jobs in a heartbeat, unable to compete on price.

The only way the weaving and dyeing of the industrial revolution might return to developed countries is through AI, and the same is true for much of the heavy industry sector, including steel production. As long as there are folks in Asia, Africa, and South America prepared to work long hours in dangerous conditions for paltry wages, no tariffs will ever save the Western World.

Furthermore, in the West the environmental costs to our waters and to our atmosphere are too high a price to pay. Legislation enacted through the US EPA, the European Environment Agency, and other agencies adds to the costs of production, making it impossible for North America and Europe to compete.

In the US, the American way of life is widely regarded as a summit to which other nations aspire; this regard is itself aspirational—few Europeans would agree. The annual quality of living survey shows the top US city (San Francisco) comes in at number thirty-four, and eight of the top ten cities are in Europe.

The perception that the American way is the way, and the lack of understanding of other societal models, is at the root of the collapse of the trade talks. The Chinese Communist party implements a command economy with a bruising fist, just as the Soviets, East Germans, and so many others did in the past.

Since Deng Xiaoping—the little bottle—China started applying a different economic model, using test areas such as Shenzhen, but no Chinese thought for one second the regime would fall.

In practice, private enterprise has always been beholden, and at the highest level controlled, by the Party. In Chinese society, the two are inextricably linked—it is possible for politicians to do business, but it is not possible for businessmen to do politics.

The notion that an American businessman, and not a particularly good one at that, will impose a new value system upon the Middle Kingdom is laughable. Chinese society, as it stands today, will never accept a private model where government is not involved—it was government that set up China Inc.

China has a number of disadvantages in this war, including exposure, but it has two major advantages—time and control. Time, because like the Taliban, it needs only wait for the next US election, voter fatigue, or an economic crisis in the US, and North American priorities will quickly shift—this is partly why democracies have a tough time with asymmetric warfare, as evidenced by Iraq, Afghanistan, and Syria.

Control, because the Chinese political system can make the country turn on a dime and stay the course—whereas the American elephant can’t dance. Control, because severe economic hardship in China is enforceable, whereas in the US it’s not. Finally, control, because as Mao famously noted during the Korean war, ‘one dead American is a tragedy, one million Chinese is a statistic.’

Nanjing Dong Lu, leading to the Shanghai Bund, part of the International Settlement (1863-1941)

The Chinese know they are the celestials, and they resent everything about the mei guo ren—long memories do not forget the oppression of Chinamen who built the American railways, the Shanghai international concessions, the Korean war, and US support for Japan and South Korea.

In this foolish and naive attempt to impose societal change through trade negotiation, Trump is once again making a poor decision, regardless of how unfair Chinese trade practices really are, or are perceived to be.

Just as with Kim Jong-un, the border wall, and the anti-immigration laws, the orange man is seeking a second term using a simple recipe to please his base—he wants to show he tried, and build the narrative that he won. Whatever needs to be completed will be done in the following four years—in the minds of simple people, the story flies.

A year and a half away from the US elections, the Democratic field can only be described as chaos. And although the sitting president has solved nothing, he stands every chance of being re-elected.

With respect to his self-serving objectives, Trump shows extremely good judgement, as he has all his life.

From an international perspective, the forthcoming American election is a struggle between Russia and China. Regardless of the Manchurian candidate controversy, it is unquestionable that Russia is stronger if China is damaged and the European Union weaker.

Election meddling will again be rife, with the Chinese supporting the Democrats and the Russians backing their man.

May you live in interesting times.

The India Road, Atmos Fear, Clear Eyes, and Folk Tales For Future Dreamers. QR links for smartphones and tablets.

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