Readers might have noticed that my articles would at times attract lengthy comments and additional facts or information from a certain Walla. Walla is an extremely knowledgeable man; he did his degree at the University of Malaya. Even though he has some health issue to cope, he lives happily with his wife in a suburb of Petaling Jaya. One of his great granduncles was none other than the great physician Dr Wu Lien-teh who was the first medical student of Chinese descent to study at the University of Cambridge and the first Malayan nominated for the Nobel Prize in Physiology or Medicine in 1935. Another uncle of his was tasked with launching Kolej Tunku Abdul Rahman, which is now called Tunku Abdul Rahman University of Management and Technology (TAR UMT).
I thought I should do justice to his effort and taking the liberty to forward his four sets of comments on my article to friends…
First Set of Comments:
Meanwhile, Trump has picked the following:
Marco Rubio (State); Howard Lutnick (Commerce); Matt Gaetz (AG); Peter Hegseth
(Defense); Tulsi Gabbard (Intelligence); Robert F Kennedy, Jr (Health); Michael
Walz (National Security) Kristi Noem (Homeland Security); Thomas Homan (Border);
Elon Musk & Vivek Ramaswamy (Efficiency); Lee Zeldin (Environment); Susie
Wiles White House); Elsie Stefanik (UN); Douglas Burgum (Interior); Linda
McMohon (Education); and John Radcliffe (CIA).
At time of going to LYB Press, the following have not been filled – Kash Patel
(FBI); Lighthizer (Trade); Kevin Warsh, Marcus Rowan, William Hagerty, Scott
Bessent (Treasury).
In any case, Trump rewards supporters, so behind Lutnick will be Lighthizer
behind whom Navarro behind whom Bannon; all four are unreconstructed anti-China
tariff-men and decouplers.
Unlike Xi’s technocrats who have already displayed publicly recorded
achievements on their way up, it is apparent the abovenamed are just Trump
loyalists who happen to be chosen because they are trumpeteers and Trump is
insecure, thus needing yes-men who will toe his line and do as he has promised
to his voters who remain bestirred and clueless to a fault on all important
matters, and plainly too lazy to research and think through more thoroughly;
even Musk almost came undone with Tesla and SpaceX but for a subsidy.
Furthermore, Trump has just asked his Vance to prevail upon the bipartisan
Ethics Committee not to make public any report after it investigates Gaetz and
Hegseth on their peccadilloes. What is there to hide if one is to be publicly
answerable – unless there is, and one isn’t.
Third Set of Comments:
The other tedious note is on trade
balance, tariff, and decoupling. Trump is under the mistaken notion trade
deficits can be reduced and more jobs created by just tariffing imports.
However doing so will instead cause tariffed exporters to reshore to other
countries so that as long as the US imports to consume, its overall trade
balance is not reduced.
Is Trump to tariff those other countries next? As a major consumer economy, the
US will soon have to tariff every other country which exports into it who have
reshored assets from the tariffed countries.
The result will be the US ends up isolating itself by tariffing itself in
effect; at the same time, its own exports won’t find ready markets in other
countries which will seek friendlier substitutes.
As for jobs, the last time Trump did it, US overseas companies moved their
assembly lines to other countries instead of their US and absorbed his tax
reductions in share buy backs. By example, the US steel and aluminium industry
remains subdued despite protectionist tariffs.
There is historical precedent in the Smoot–Hawley Tariff of 1930; the US
tariffed 40% of imports; other countries retaliated with their own tariffs;
global trade crashed by 65% and the US exacerbated its own Great Depression; in
the post-crisis aftermath starting 1938, the trade-to-GDP ratio was 20% lower
than what it was in 1929. Everyone suffered.
Some may argue that during Biden’s carry-on of Trump’s first-term tariffing,
the US economy grew. But that’s ignoring the economic growth came from pent-up
consumerism by spending covid-dispensed helicopter money, debt-inflating tax
reduction, government projects, and oil and arms exports to Europe.
Moreover, it’s a given that richer countries will face manufacturing job
declines because their output per worker grows faster in manufacturing than in
services by dint of automation and systems replacing workers, and secondly,
people will spend more in services than on manufactures as they become richer –
whatever the trade balance.
But this will unfortunately be lost on Wharton-trained Trump et al who thinks
for the US, it should still be in the 50s.
The bromide is simple – Trump should ask Lighthizer and Lutnick to survey how
many rustbelt workers are still unemployed owing to jobs emigrating overseas by
globalization.
If the US economy is said to be humming, all would already be employed so why
the need to tariff imports for purpose of creating jobs by import substitution
for them?
In fact, they may lose their present jobs when US tariffs make their purchases
pricier, inflation comes back post-Powell to trigger higher interest rates and
thus magnify financing costs and reduce new investments amidst retaliation by
other countries.
European plants are already mulling to move to the US to avoid Trump’s 10-20%
preannounced tariffs but what be their workers?
The world is too integrated down to supply-chain nerve endings for Trump’s
madcap trumponomics.
Whether it be Biden or Trump, the US is in a diddly-squat mess.
On the other hand, across the oceans, China remains consistent, calm and
collected.
Xi told Biden but for the ears of Trump ahead that China’s four redlines must
not be crossed – Taiwan, sovereignty, system and development – and these
redlines are canopied in the context of US-China relations by two remits – that
China harbors no direct intention to displace the US, and that mutual respect,
peaceful coexistence and win-win cooperation must form the underpinning
principles of healthy and progressive relations.
However, one is not naïve to think the US vulgarians can fathom the depth of
these practicalities.
This means China may hope for the best from the US but be prepared for worse to
come. She has already been doing so since 2012.
Many moons ago, I was in an SME hub in Dalian. The toner maker said two things
– that he was upgrading with new machinery for value-adding, and that it’s all
about supply chains.
Despite roiling turmoil, China has reemerged again and again. The Chinese are
proud survivors and verdant pragmatists. Of the last 20 out of 22 centuries,
China was the biggest economy in the world; in 1820 alone, China comprised one
third of the world’s GDP, more than the US and Europe combined.
Maybe that’s why the lion still roars:
End.