In the video Trump said that he will remove Overhaul the China trade policies, let look to see the effects Trump’s idea will have on China and the USA.
Why did the USA send manufacturing to China?
Due to greed and cheap labor US manufacturing moved to china in order to make large profits. President Clinton signed the U.S.-China Relations Act of 2000 in October. China joined WTO on 11 December 2001 with help from the Clinton administrating. This helped to reduce the cost for China to do business across the world.
Due to China’s limits on Rare earth exports, multiple US businesses moved to China to gain greater access to rare earth. At the moment China accounts for 63 percent of the world’s rare earth mining, 85 percent of rare earth processing, and 92 percent of rare earth magnet production.
China’s weak currency make it very profitable for manufacturing in China, by selling goods to countries with strong currencies. Basically for easy understanding, if you sell goods when you stay in a country with a weak currency you get more unites of currency then you would have gotten if you sell it to a country with a weaker or similar currency.
China has a economic system which is a mix of capitalism and mostly socialism. Socialism only work when you are able to generate money out side of your country or place high taxes on you own population. The reason for this is because the government acts as a middle man pushing up the cost of the program. Placing high taxes on you own population makes economic growth difficult and makes you economy very sensitive. One glitch and your economy collapse.
Most countries with Socialist programs, pay for those programs by using foreign investment, financial services and exports. China is buying up property across the world, owns most of US debt and is the worlds largest exporter. Basically US debt, US property and the US citizens is paying for the Chinese economy,
Not only does China have a big socialist infrastructure, it has a one party system, which means the people can not change the government in a peaceful manner. In order to maintain a one party system you need to spend large amounts of money, for propaganda that sells government ideas to the people, surveillance to identify potential threats, limit speech, limit expression and limit the press.
Chinas’ biggest weakness is its government system, because of the amount of money that is needed to run it. All that needs to be done to weaken China, is to cut off its foreign income. Trumps plans targets two of the Chinese sources of income, but even if Trumps plan goes into effect, it will not collapse China, but reduce its growth, reason being: China is still buy up other countries.
Which have been method above is also the reason the Chinese system can not be copied, the more countries that copies China the less foreign money each will generate, which will lead to all of them collapsing.
A country can only be a true superpower when it has the following:
- A Large manufacturing base. With out a large manufacturing base you can not win a war with a country which has similar technology, because you will run out of weapons and ammunition.
- Manufacture medications. During war your enemy will not give you life medication, and you never know who will attach you in the distant future. During the pandemic imports was stopped to prevent the spread, so no medication if you do not make it yourself.
- Food production, with out food people die. Importing food places a big strain on your economy, because more money is spend on food and less money is spend on everything else. Everybody eats.
- Affordable local energy. Importing during war is risky business, having your own energy reduces the risk that you will run out of energy. The cheaper your energy, the less money is spend on energy and more money is spend on goods and services. The more money is spend on goods and services the stronger the economy.
- Large water supply. No water no life.
- Technology raw material. You can be the most advanced nation on earth but, no raw material, no technology.
At the moment, the US manufacturing is gutted, China is making US medication, The US and world has massive food inflation, the US has limited its energy production, At the moment China accounts for 63 percent of the world’s rare earth mining, 85 percent of rare earth processing, and 92 percent of rare earth magnet production.
By these standards China is the world superpower not the US. Trump says he will address 4 of these.
Trumps China Trade Plan the Good and Bad
What happens in the USA effects the whole free world, thus it is important for all those who believe in freedom that the leader of the USA restore the force which keeps the free world inline.
Bringing back manufacturing to the leader of the free world will always be a good thing. Many leaders who align themselves with the USA only uphold the precipices of freedom because they fear the USA and the impact their discretion will have on them.
China does not enforce the principles of freedom. With them as the world super power; human rights will slowly disappear and government oppressions will increase and since the raise of China we can even see the erosion of freedom with in the USA, as elements with in the free world already started to align themselves China, many do so in secret. However their actions speaks volumes.
Trump plans to over haul the tax system, Trump did not give any details; so we will speculate. Tax on business is what called a universal tax. A universal tax is a tax which everyone is paying, namely business tax, sales tax and so on. When you increase tax on business, profits drops so in return the business increase the profit margin which you as the consumer pay, their is no such thing as tax on the rich if that tax includes tax on business.
Lowering tax on business will attract more business to the USA and make them more profitable, unfortunately Trump does not believe in increasing the minimal wage, so you as the consumer will not benefit, but the unemployed will. Trump did say he will reduce tax on manufacturing.
Trump also what’s to interduce a import tax that will adjust according to currency value. This is brilliant, however I would prefer if Trump adds penalties for countries who pay low minimal wages, to encourage those who wants to trade with the USA to pay employees more, this will also help to deal with the future AI problem which we will disgust in a future article.
Another Tax which Trump may consider is a decentralization tax. What is a decentralization tax? During apartheid in South Africa the Government came up with a decentralization tax. The idea was to decentralize the population so that it will be harder for an enemy to collapse the country in one go. This is the basics of a decentralization tax. A small town or new development located between two big populations centers is selected. Manufacturing which locate their factories at this location will be given tax credits over a period of 10yrs. First year the full credit the following year is drops with 10%, and each following year it drops with 10% until the factory is paying normal tax rates.
I would also suggest that Trump makes it illegal to import electronics. Business may import electronic parts, but it has to be assembled in the USA, by USA employees. This however only needs to be done if more jobs are needed. The USA has a strong economy and this may result in to much work and to little people, when combined with all the new manufacturing jobs.
Trump did not mention how he will secure rare earth, some manufacturing left the USA because, of the availability of rare earth. Trump has to present an idea on how he is planning to secure rare earth from some one other then China.
Trump also said, that he wants to phase out all critical imports from China, like medicine, electronics and steel, over a four year period. This is very important, probably the most important part of Trumps speech.
Trump China Trade Overhaul