The Duran: Trump gives Huawei some space, US-Chinese talks resume

Alex Christoforou and Alexander Mercouris discuss the G20 Osaka compromise between President Trump and President Xi, to pause the ongoing trade dispute and continue negotiations for a deal between their countries. Trump agreed to allow US companies to sell parts to Huawei, while not excluding the firm from the Government’s blacklist. Trump told reporters that “US companies can sell their equipment to Huawei,” providing that equipment poses no “great national emergency problem.” Trump’s ‘backtracking’ was criticized by the establishment media and many members of Congress.

My Comment: Trump’s [minor] concession to the Chinese was in exchange for Xi’s promise that China will import more food from the US. Trump’s supporters among farmers will no doubt be glad. The President’s decision not to levy higher tariffs on Chinese goods shows just how important trade relations between China and the US are. Even though the US has the know-how and the capital and the land and the skilled labor necessary to be self-sustainable, the short term belt tightening and higher prices required for such a dramatic course of action is – given the present political situation – simply untenable. Chinese goods and Chinese demand for US output aren’t going away any time soon.

A good deal can and will be reached between Xi and Trump, but once signed it has to be maintained – and it will be maintained only if geopolitical tensions won’t escalate. And I’m not referring just to the South China Sea, but to Venezuela and Iran as well.

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The Duran: US-Mexico Deal

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss the tariff deal reached between the United States and Mexico to “stem the tide of migration”. Donald Trump announced that the tariff threat in response to a surge in illegals from Mexico to the US has been suspended. Both men emphasize this fine detail. For its part, the Mexican Government has agreed to restrain migration through its territory and toward the Southern Border. House leader Nancy Pelosi had her own thoughts on Trump’s big PR win, saying: “Threats and temper tantrums are no way to negotiate.” Christoforou and Mercouris also discuss the past trade relationship between the US and China, pointing out that while American blue collar workers suffered as China’s trade surplus with the US grew, the US political establishment saw this and did nothing.

My Comment: Alexander Mercouris is exactly right that US elites [republicans and democrats] did nothing to protect blue collar workers from cheap Chinese imports. This graph clearly illustrates this, and, like Mercouris pointed out, it wasn’t China’s fault. Big US capital was happy to profit.

As the Chinese were selling more and more net wealth to the US in exchange for US dollars, this not only impacted the quantity of trade, but also the composition of trade, the makeup of domestic industry, its associated labor segment and remuneration. It’s also important to note that, even with fewer labor inputs, US manufacturing output did grow over time.

And despite Trump’s bogus claims that the economy is booming like never before, the country’s output capacity has yet to recover to pre GFC levels. This next graph shows us that.

The relative good economy now is due to private debt growth, not anything else. By the by, dollar reserves obtained by China [earned through trade and unearned via interest from US treasury bonds] even though being owned by the Chinese central bank, these dollar accounts sit at the Federal Reserve’s ledger. In case of serious conflict or just whim [like in the case of Venezuela], the US central bank can freeze these accounts or delete them outright, which would deny China’s ability to use these funds to purchase output [from vendors legally allowed to sell to Chinese firms]. No amount of tariffs, however, can replace domestic investment in infrastructure, R&D, and education.

Many people think the Chinese got the competitive advantage because they allowed foreign capital to come in, rape the environment, neglect workers’ rights and labor conditions and pay them slave wages. But there are other countries on the globe that do the exact same things, yet they are not manufacturing powerhouses. The key difference is that the Chinese state invested in education and infrastructure, including hospitals. And at long last, it seems the Chinese leadership is determined to focus more on domestic consumption, rather than exports.

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