The Chinese Finger Trap

Remember the Chinese finger traps? Those bamboo tubes that you would stick your finger in one end, then the other end. And when you tried to pull out the “trap” closed on your fingers. The harder you pulled, the tighter the trap. You can still get those things at Amazon. Made in China, of course.

https://en.wikipedia.org/wiki/Chinese_finger_trap

Seems to me as though Mr Trump, in his dealings with China, has fallen prey to this old Chinese trick. Like the 4 year old pulling frantically to get loose, Mr Trump has stuck his tiny fingers of “tariffs” into the Chinese trap of “retaliation”.

There is an old saying : “When your only tool is a hammer, everything looks like a nail”. It seems as though Mr Trump has only one tool in his arsenal. Tariffs. And when tariffs don’t work, pull harder. More tariffs. Harder. More tariffs.

As in his dealings with China, Mr Trump just announced more tariffs with our second most important trading partner, Mexico. Unless they somehow stop immigration he will ratchet up tariffs. Keep in mind that about 40% of Mexico imports are actually dependent on US parts sent to Mexico for final assembly.  Tariffs will impact negatively on US industries .

Back to China. China has a long history of hardship and conflict with the West. The communists took over precisely because of the failure of the nationalist government to deal with foreigners. China is the “Middle Kingdom”. The two characters in the written Chinese language stand for those two words. China has always seen itself as the center of the universe.  Americans are tribal , but compared to Chinese ethnocentrism, Americans are downright globalists. The Chinese will not submit to humiliation. Never.

So, China can and will survive any hardships. After all, the leadership of China does not need to worry about elections. They can dictate  and absorb any economic downturn.

US trade with China accounts for about 13% of China’s trade with the rest of the world. A big chunk. But over the last 20 years China has been expanding markets to the rest of the world. Today, China has a higher percentage of trade with Australia than it does with the US. More trade with the EU. More trade, by far, with the rest of Asia. More trade with Africa and Latin America. In fact, China has focused on Africa and Latin America and has rapidly expanded into those markets. China can withstand a 13% trade hit. Can the US withstand a 16% hit on the other side?

So, Trump’s tariffs will not work. He is caught in the Chinese finger trap with no way out. He just pulls harder and harder.

Trump will not take advice. But on this one, he should. He should find a 5 year old. Because, as any 5 year old can tell you, getting out of the Chinese finger trap is easy. Just give in a little bit. Loosen the grip. Stop pulling so hard. Relax.

You would think the world’s greatest “deal maker” would know by now. Or maybe Trump never played with a Chinese finger trap. Or maybe he got stuck and could not extricate himself.  Perhaps he had to be cut out of the trap by his daddy? At any rate, he is stuck now with no way out.

1 Comment

Filed under Chinese, economics, Economy, Foreign policy, Free Trade, NAFTA, Politics, Trump, United States

One response to “The Chinese Finger Trap

  1. I like this a lot; worthy topic; clever analogy.

    I can’t help wondering what would have happened if the TPP hadn’t been almost universally maligned and destroyed. It was designed to align the countries in the region to prevent China’s gaining traction despite its internal problems.

    Liked by 1 person

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