Drudge Retort: The Other Side of the News
Wednesday, May 22, 2019

Expect US President Donald Trump to emerge from this high-stakes US-China trade war with a face-saving deal that he will spin as a great success – but one that fails to fundamentally change China's state control over markets, subsidies and theft of trade secrets. That is the conclusion of experts in game theory and strategic negotiation based on an analysis of the plans, tactics and pressure points of both sides.

Viewed through this lens, the US-China trade war falls into the "war of attrition" category, in which two relatively dominant players stick doggedly to their incompatible positions, each expecting the other side to fold so they can emerge the winner, experts say.

Fuelling the US-China trade showdown is what experts term "asymmetrical information" – wherein each side knows its own strengths and weaknesses, doesn't know its adversary's and slides into mutually destructive behaviour convinced the other side will cave with the next threat.

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For Chinese President Xi Jinping, these include the political risks associated with angry farmers, factory owners, consumers and a broader economy damaged by high tariffs, as well as nervous financial markets and the cost to his leadership if he miscalculates.

These are mirrored on Trump's side to varying degrees, magnified by the risk that a trade-intensified recession or an apoplectic political base could derail his quest for a second term, a vulnerability Beijing has sought to exploit by targeting agriculture products in states he needs for re-election.

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One of the better "arms length" analyses of where the parties stand on the US/China Trade negotiations, well worth the read for those who are interested.

#1 | Posted by Rightocenter at 2019-05-22 03:42 PM | Reply

Pretty interesting read.

#2 | Posted by JeffJ at 2019-05-22 03:53 PM | Reply

#2

Lots of big words, though, so most of the Usual Idiots of the DR Left won't even try to read it.

#3 | Posted by Rightocenter at 2019-05-22 07:46 PM | Reply

"Expect US President Donald Trump to emerge from this high-stakes US-China trade war with a face-saving deal that he will spin as a great success "

These experts don't understand the conditions on the ground in China. The latest example with Huawei is a great case in point. This company employs 188,000 people directly - their supply chains a similar amount. With one call, Trump effectively killed the company. This was long overdue. Huawei is only relevant today because they stole Cisco's networking IP (source code for switches, etc) so it is long overdue that the US finally did something about it.

As to the what will happen - your proxy is the US housing market of 2005-2008 - that is what China's manufacturing sector is like today. In order for China's economy to not dip into severe recession, they need HIGH GROWTH in the manufacturing sector - staying flat or even modest growth collapses the whole house of cards. This is because of all the spending related to manufacturing/export. 42%+ of their GDP is fixed assets - either related to residence housing (no economic value long term) or infrastructure related to the manufacture or transport of goods for their export economy. So, it is not just a decrease in export economy that Trump is threatening - it is the entire infrastructure spending that supports it that will cease. The writing is already on the wall - manufacturers are leaving to lower cost countries - Vietnam, Myanmar, Cambodia, etc - even if they don't come to the US, China is hurt.

This is very different from 20 years ago - then, China was undergoing the mass migration into the cities - like 500,000,000 people over 20 years which kept wages low. The government was very inviting of foreign investment, and they were the only country with decent infrastructure. Most importantly, they were nearly debt free as a nation. None of those things are true anymore. That is why China cannot win. They will take whatever deal Trump offers of they will watch the biggest economic implosion in the history of the world.

#4 | Posted by iragoldberg at 2019-05-23 03:44 AM | Reply

Expect US President Donald Trump to emerge from this high-stakes US-China trade war with a face-saving deal that he will spin as a great success – but one that fails to fundamentally change China's state control over markets, subsidies and theft of trade secrets.

That's what he got with his new nafta. A deal that was better for the US in some areas, but way worse in others. Then he comes out and spins it as the greatest deal ever.

#5 | Posted by Nixon at 2019-05-23 12:40 PM | Reply

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