The posture and rhetoric of the Don regarding the US trade deficit with China was more bark than bite. He knew as a negotiator that China’s ruling mafia wouldn’t return his calls without having experienced pain. It meant threatening, cajoling and more threatening; it also meant timing. China is currently witnessing a profound social revolt embodied in both municipal bond maturities and a deadly vaccine scandal. Because the US does such a poor job of reporting on foreign domestic unrest in China, the US is losing out on taking China’s measure in a trade war.
The Chinese economy remains a command based polity. That means it has absolutely no constitutive relation to market based economies. It means China’s flying blind.
The US trade deficit with China is composed of two incompatible regimes. The US is a consumption based economy, China is export based. We can carry on knowing of continued capital inflows and consumption. The Chinese can’t. They’ve got to have markets to sell to or their dead.
The best view of trade deficits is analytical or comparative. A tool embodying a balance on goods/services that also measures cross border investments and transfer payments has other notable constitutive components far too opaque to hold together. The material components of the US trade deficit are supply chains, patterns of investment and savings, exchange rates and differential production advantages. All of these components need to be held together in view of each nations relative growth rates.
The US is winning because of the intangibles located in our culture. A stability composed of the rule of law, sanctity of contracts, and stable governing institutions. Because the culture of doing business provides unbound accountability and transparency, the US will win a trade war with China.