Tariff War, Trump restrained by weak negotiation hand

Initial brouhaha followed by adamantine talk sometimes bordering on un-parliamentary language, evidencing unbecoming as a statesman, Trump got it all wrong. His abrasive style apart he did not see what is coming when he played his negotiation hand.

Soon after he moved up in the escalation ladder of imposing tariff mainly on China that began with 34% jacked up to 84% boosted with 125% fleshing more by 145% and finally rocketing to 245% he made a fool of himself. Xi Jinping kept his cool opting for a flank attack instead of a direct counter-attack.

China used the tariff war to hit America where it really hurts. Export control of the critical minerals and rare earths, upon which USA depends lot more than what custom details would indicate. These elements cannot be bought from elsewhere immediately. Russia could supply quite some of these but right now there is no way this can be expedited as trade relationship between America and Russia has still not recovered from enormous sanctions placed on the latter.

From the laymen’s point of view America got crewed. But from navigating business strategy amid geoeconomics point of view it is not too bad. Trump needs his team to look at the flowing pointers as regards to his negotiation leverage and respond in a fitting manner after adjusting US business strategy vis-à-vis China in particular and the entire globe in general:

1. China exports less than 15% of the total volume of her export trade to USA. She over the period of time could and would find alternate buyers

2. Chinese exports are getting more diversified than American exports. Although consumer items is a main stay in China, techno is slowly becoming huge

3. Chinese products are relatively cheaper than American ones

4. China uses investment and debt finance as diplomatic tools

5. Almost all the members of UNO have some sort of trading relationship with China

6. China has monopoly in the critical minerals and rare earths export

7. The World Factory was once in America now is in China.

8. As an authoritarian state, China has an edge in decision making and adjusting the negotiation leverage quickly to respond to any critical threats to her geoeconomics sway!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist