Winners And Losers When Trade War Breaks Out Between The US And China

Tyler Durden's picture

The small of trade war between China and the US is becoming ever more rancid.

In the latest development, this morning we reported that the Trump administration is planning a probe of what the U.S. sees as violations of intellectual property by China. Against a backdrop of Trump’s frustrations with domestic policy, sliding approval ratings and disagreement with China over North Korea, the chances of protectionist action are rising according to Bloomberg while CNBC adds that the official start date of the trade war will be this Friday.

But who stands to lose - and win - if the U.S. takes aim at the unbalanced trade relationship? Bloomberg has done the math and found that with total trade of more than half a trillion dollars a year, the list of potential losers is very long. The most notable examples include:

  • U.S. companies such as Apple Inc., which assemble their products in China for sale in the U.S., and those tapping demand in China’s expanding consumer market.
  • U.S. agricultural and transport-equipment firms, which meet China’s demand for soy beans and aircraft.
  • Manufacturing firms from the U.S. that import intermediate products from China as an input into their production process.
  • Retailers including Wal-Mart Stores Inc. and the U.S. consumers that benefit from low-price imported consumer electronics, clothes and furniture.
  • Other trade partners caught in the crossfire of poorly-targeted tariffs. On steel, for example, U.S. direct imports from China account for less than 3% of the total -- below Vietnam.

And while conventional wisdom is that the US has a chronic trade deficit with China - it does - the U.S. also runs a nearly $17 billion trade surplus with China for agricultural products. China consumes about half of U.S. soybean exports, America’s second largest planted field crop. Soybean farms are mostly located in the the upper Midwest (Illinois, Iowa, Indiana, Minnesota and Nebraska). The volumes are so significant that a spike in soybean exports was a noticeable contributor to GDP growth in the second half of last year as readers may recall. China is also a major buyer of U.S. aircraft, perhaps the only areas of manufacturing where the U.S. retains a competitive edge (though not for much longer). The U.S. also has an $8 billion dollar trade surplus with China in the transportation equipment category.

U.S. Trade Balance With China by Product

How about geographially?

It may come as a surprise that on a state-by-state basis, eight U.S. states are running surpluses with China, six of which supported Trump in last year’s presidential election, including West Virginia. In 2016, Louisiana registered the largest surplus, at 2.9% of the state’s GDP. Louisiana’s exports to China are likely inflated given that 60% of U.S. soybean exports are shipped through the Gulf coast. Washington state was second at 1.6% of GDP, largely due to aerospace exports.

Tennessee maintains the largest trade deficit with China at 6.5% of GDP, meaning tariff-induced increases in the price of imports could have the biggest impact on this state.

The biggest losers? Mississippi, Georgia, Illinois and  California, all of which maintain deficits at more than 3% of GDP.

For the sake of brevity, we will not discuss another, more troubling, aspect of conventional wisdom, namely that trade wars almost inevitably lead to real wars. Aside for the US military industrial complex, there are no winners there.

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lester1's picture

China will collapse without access to US markets. We can do without cheap Chinese goods!

 

Don't forget China is still a communist dictatorship. Those millions of Chinese factory workers won't just sit by unemployed. They will riot and protest.

 

Tienenmen 2.0 !!

db51's picture

you could clear every single shelf in Walmart of Chinese goods and it wouldn't cause any life changes...other than the little rugrats whose mom is on EBT and buying the shit to keep their little screaming asses happy at the checkout 

 

The_Juggernaut's picture

Oh no! Where will I get my cheap plastic crap?!

Save_America1st's picture

a massive deflationary spiral and crash is coming, followed by a massive hyperinflationary event in the dollar.  Over abundance of nearly everything along with massive debt, loss of all the bullshit excess credit, and further massive devaluation of the dollar will cause hoarding and conservatism in a way which will trigger the deflationary implosion.

Next will be the loss of the dollar as the world-reserve currency as the world monetary system shifts away from the petro-dollar.  The domestic U.S. dollar will implode further by 50 to 75 percent...a massive shock to the system........then massive explosion of unwanted dollars back into the U.S. along with desperate sheeple trying to rid themselve of these worthless dollars all at the same time in order to buy anything they can get their hands on as the dollar hyperinflates.

We have anywhere from 6 to 18 months, bitchez.  This is Fight Club.  We speak the truth. 

Keep stackin' phyzz, diversify some funds into cryptos and store them offline in cold storage, and stock up on long-term chow, guns, ammo, etc.  You all know the drill if you've been around here longer than the previous 12 months of troll scumbags, right????

Don't get down about it...don't let these assholes confuse you about what's coming...it's now closer than ever and getting closer by the day. 

Oh wait, my bad...the DOW is at 20,000!!!  Everything is Awesome!!!!!!  Right???

Fuck that...paper tigers will perish from the Earth.  We know better by now and we aren't weak hands who will sell out before the collapse. 

Most of you all know what the right thing to do is. 

philipat's picture

All of the presented data is misleading because the bulk of the "defecits" are accounted for by US CORPORATIONS who keep most, if not all, of the profits accrued through the offshoring of US jobs, offshore to avoid paying US taxes. And these jobs will NOT be brought back to the US they will simply move to Vietnam, India, Bangladesh, Sri Lanka, Indonesia etc, so the only loser will be the US consumer who will have to pay more because of imprt tariffs. This at a time when she is already stretched beyond hope. Even China itself will not suffer other than through unemployment because China doesn't make the profits from the manufacturing, that again is the US Corporations who "hide" the profits offshore using transfer pricing (In and Out) using offshore tax havens, together with Royalties, Trademark License Fees and other "Fees" for the use of IP, again ALL paid to an offshore entity or SPV.

fattail's picture

The chinese have 300 million middle class industrial slaves working in their factories.   I wonder how deep their pantries are.  2-3 weeks of food.  A 1.4 million man army can get stretched pretty thin.

BarkingCat's picture

Those in the cities, whom knows,.

Those in the countryside have probably more than a year of food stored and they are growing their own constantly. 

However, many people in the cities have families in the countryside. 

They would simply go back home. They don't want to, because going back is like takinga trip back to the 1600s.

Still, it beats starving.

 

gatorengineer's picture

Name one deflationary event in the history of mankind.  The only thing deflating are salaries.... and the price of shiny...

gmak's picture

1929 to name the most obvious. 

ParkAveFlasher's picture

Schacht-driven DM stabilization pretext to Nazi Germany (following Weimar Germany).

Xena fobe's picture

We can live without plastic.  But can we live without CLOTHES?

We're all going to be walking around dressed like Fred Flintstone.

Déjà view's picture

"Walking"...Long March...

HenryHall's picture

Global warming makes clothes beyond Tee shirts and shorts unneccessary.

espirit's picture

Uh, mid 40's here in North Dakota this am.

Trogdor's picture

Well, when I was stationed up there, 30 degrees was t-shirt weather ... because it represented an 50 degree improvement ;)

Doom Porn Star's picture

New made-in-the-USA textiles and clothing made of hemp grown in lieu of soybeans will solve several of these problems.  

Can the whining and the diversity undermining of quality: start hiring and investing, promoting and contracting based on merit and results.  

America can indeed be great if those who are naturally endowed with great ideas, great ethics, and great courage are finally freed of the shackles of the vicious rentier and financialization rackets and the false associated duopoly enforced theiveries and frauds of the avarice and victimhood complexes...

Perimetr's picture

Yeah, right.  Obviously the US can make everything it needs

despite the fact that we have offshored 90% of our industrial base.

Last year China's exports to America amounted to

$481.8 billion or 21.4% of its overall imports.

  1. Electronic equipment: $131.7 billion
  2. Machinery: $100 billion
  3. Furniture, lighting, signs: $31.6 billion
  4. Toys, games: $24.9 billion
  5. Plastics: $15.6 billion
  6. Footwear: $15.4 billion
  7. Knit or crochet clothing: $15.1 billion
  8. Vehicles: $14.3 billion
  9. Clothing (not knit or crochet): $14.2 billion
10. Medical, technical equipment: $11.7 billion
Xena fobe's picture

Then it will take a little time to retool elsewhere.  A year or two.  It must be done.

espirit's picture

Who do you think will do the capital outlay here in the US? Corporations?

Buhahahaha!

spag's picture

yes.... but your average mr lardy arse doesnt want to do the job, you'd have to import the mexican murderers and  rapists over the wall.

DaBears's picture

Well, I guess US will move to cheaper India and Vietnam then. None of BRI_S nationsare retarded enough to sign a free trade Agreement with China, US is retarded.

AllBentOutOfShape's picture

“Made in China” is the backbone of retail trade which indelibly sustains household consumption in virtually all major commodity categories from clothing, footwear, hardware, electronics, toys, jewellery, household fixtures, food, TV sets, mobile phones, etc.  Ask the American consumer: The list is long. “China makes 7 out of every 10 cellphones sold Worldwide, as well as 12 and a half billion pairs of shoes’ (more than 60 percent of total World production). Moreover, China produces over 90% of the World’s computers and 45 percent of shipbuilding capacity.

http://www.globalresearch.ca/imagine-what-would-happen-if-china-decided-...

Doom Porn Star's picture

The walk-in closets and storage units of America have more than enough cheap shoes and concert t-shirts, more-than-enough tupperwear and stack bins, more-than-enough Disney-branded kiddie distractions and video games.

Substitution of hemp for soybeans in the fields of the heartland, and the domestic production of textiles and clothings and pseudo-plastics from hemp will provide most of the necessary outputs to solve clothing and container/packaging and fabrication issues.   

 

The garages and dealer lots of America have more-than-enough rigs and cars, more-than-enough used farm and construction equipment, more-than-enough furniture and gardening equipment, more-than-enough coal and LNG to fire the converters and furnaces to shape the more-than-enough aluminum and steel to make more-than-enough ingots and coils to make more-than-enough signs and lighting fixtures, more-than-enough parts, plates, rails, sheets, pipes, casts, etc., etc..

 

New Jersey and California have more-than-enough expertise to design and generate more-than-enough medical and communications equipment, Texas and Virginia have more-than-enough expertise to design and generate more-than-enough technical equipment and electronics, Alabama and Massachusetts have more-than-enough expertise to design and manufacture more-than-enough robotics and textiles, etc. etc.; -to meet domestic demand.


America has millions of people with ideas and ethics and drive and hope that hungrily await opportunitities to avail themselves and succeed.  

They will all get busy and most will do quite well for themselves -and the country, if only the globalist industrialist and international financialization rackets are restrained and divested, and the politics of punishing merit and restraining liberty are defeated...

I trust the great silent majority of disenfranchised labor and entrepreneurs, native sons and girls-next-door, set-aside 'whites' and ghettoed 'minorities' and stepped over legal immigrants.

I TRUST my fellow citizens not to fail themselves if unleashed.  

They WANT to succeed.  

They do most ardently desire to taste the fruits of their labor, savor success, and revel in the realization of their dreams.

 

Let my people go!   Let me, and all my fellow peoples get to work!    

We can and we will make this nation great; no matter whether it really ever once was or not!

We will make this nation great by making ourselves great; by remaking our economy and ourselves to suit our own interests!

Let my people go!  Let me, and all my fellow peoples get to work!

HenryHall's picture

Indeed America could be self-sufficient and prosperous. By the simple expedient of closing the military bases all over the world and bringing the troops home. Import substitution for just about everything is very possible, as the Russians are demonstrating.

Will it happen?

Not a chance. American people want status, not prosperity and peace.

Doom Porn Star's picture

Prosperity and peace are the EPITOME of all status.

BarkingCat's picture

Thumbs up .....but.

There are millions of useless eaters that do not want to work and have no ambition. 

There are lots of white and latino and black people who seem to be dumber than a box of rocks yet have the depth of knowledge and skill necessary to navigate the complex and numerous laws and regulations governing various social programs, and do it efficiently. 

They don't want to work.

 

In order for the US to be self sufficient,  the government teat will have to be taken away as it drains too many resources from those who produce to those that leach. 

Only way that can happen is if there is a complete collapse or a war that actually hits the US mainland and destroys huge portions of large cities and kills off millions. Only then could the politicians get the cover to scrap the welfare system and go back to basics. 

Doom Porn Star's picture

The bureaucrats navigate the welfare system for their 'clients'.

The bureaucracies need the welfare state waaaay more than the dupes on the roles that think they are smart for getting nickels while the bureaucrats bank dollar$.

AllBentOutOfShape's picture

At what cost of labor?  $15 per hour?  What about the cost of production in the US?

The US needs China a hell of a lot more than they think.  Their profit margin depends on it.

Antifaschistische's picture

legitimate hypothesis...

I have another hypothesis...

rather than wasting trillions and trillions of RMB on unnecessary high rises...what if the Chinese decide to commit a million smart guys to replacing Microsoft's operating system or Oracle DB's.   Let's see, they'd probably have a lot of Russians and Germans who'd be interested in chipping in to help....and an entire blue planet who would be interested in their success.

Cashboy's picture

You will find that they are probably already well into that.

It would be interesting if Alibaba became a serious player in the USA and started competing against Amazon.

Westerners think that China can just copy and make cheap crap.

Remember in the 70's when Japan started exporting their cars that were cheap but poor quality how the quality improved and they became innovative.

Just think of China as the same but ten times bigger.

The USA have basically outsourced their manufacturing to China so are dependent on China.  USA needs China more than China needs the USA.

China could start printing money (if it hasn't already) to pay its citizens to supply its own market.  The USa is not the only market in the world and from what one can see that market is going to get smaller as credit runs out and more and more people are dependent on state welfare.

If the USA puts tariffs on imports from China, the USA consumers will have inflation and with wages in stagnation could see a lot of complaining desperate Americans.

philipat's picture

The Chinese ARE already well into that which is why, amongst other things, they have by far the world's fastest super-computer.

And all those vacant high-rises will one day be lived-in by real people. You need to consider whether (albeit excessive) investment in infrastructure is ultimately preferable to blowing financial bubbles with the (printed) excessive debt and in the process transferring all the wealth to the top 0.1% like some other countries?

BarkingCat's picture

Any building that is left on occupied deteriorates very quickly. This is true for buildings made using quality materials and quality construction. The Chinese high-rises are made of crap and are falling apart when occupied and maintained.

Those empty high rises will remain empty until a taken down.

Oldwood's picture

The game is for China to use US markets to build its economy. Once their own population can consume their productive output, our industries will be gone and they can name their price...BUT, they ain't there yet. Look at the violent riots they have with each plant closure. Look at the products they ship us now....well below ANY reasonable cost of production....they are GIVING away their production to keep plants running and printing the money to do it. It is their race to develop their markets while watching our production capacity evaporate leaving them no competition. As our ability to offer any competition dries up, they will be able to raise profits and bring more of their own population on line as not just producers but consumers.

We are living the dream that we don't have to work, that robots or Chinese or illegals will do it for free (we know our fiat and debt is empty promises), that WE are "entitled" to some indoctrinated notion of existence. We are WRONG. 

We still have time to prevent the worst of it but it won't be without pain. We will have to pay more for most everything if we are going to buy american, but if we don't, the ultimate pain will be so much worse. They still need us, but not much longer. 

America, in its belief that it is an "indispensable nation" will allow itself to be dispenced with.

smithcreek's picture

You are correct sir.  I'm not a lefty in the least, I'm a libertarian that believes in free trade with countries, but not with those that subsidize their own long term goal of destroying the US economy.  So when I say, bringing manufacturing jobs back to the US will lead to more equitable distribution of wealth, it's not some Occupy Wall Street stupidity, it's based on workers getting back the power they lost when they were made obsolete by offshoring.

DaBears's picture

Pretty Sino-centric view, besides not gonna happen with their State sponsored hive mind brainwashing they pass off as education, it tends to eliminate independent creativity and innovation.

keep the bastards honest's picture

@dabears, they, asians and the scandinaivans top the OECD list for  capabiltiy in maths science language etc... US is way way way down, 20 countries down  and more. so much for USA creativity if they cannot even comprehend written material or follow abstract argument. entitlement  fails right here.

opport.knocks's picture

The % IQ standard deviation doesn't matter that much, you only need a relative few very smart 130+ people to do the technical and design stuff. There are already lots of those in the USA.

BarkingCat's picture

High intelligence does not necessarily mean a creative mind.

The previous poster was right about the hive mind.

To make leaps forward in science and technology,  high intelligence is not enough. You need high creativity to go with it.

Additionally, you need freedom to allow for that creativity to flourish. 

 

gunzeon's picture

yeah, you wish, Tienamen my arse, it was a beat up by the western cheerleader press ... erhmmm

The compliant chinese factory worker, when laid off, will trudge back to his village and subsist on some cold rice and a little rat meat; tens of millions we're talking about here.

The "more equal" will barely notice they're missing.

If he - the redundant worker - decides to "go bolshie" he'll get seriously re-educated, or sold for scrap.

Here some folks want to revel in schadenfreud but China's jobless rate is one number they won't get it from.

NEOSERF's picture

Actually, I would call it a Capitalist Oligarchy...not sure what the redistribution of a company's profits are but Communism would take 100% of it, Socialism would take 65% of it and Capitalism takes 35% of it.

dumluk's picture

Soirry, but its a bit more complicated than you make it sound......

Demologos's picture

China will replace exports to the US with their One Belt One Road (OBOR) projects. Instead of making cheap plastic crap to sell to Walmart, they are already inking billions in major infrastructure projects to connect countries with a new Silk Road.

These deals are reciprocal with each side contributing engineering, equipment, labor and raw materials in a quasi barter exchange that bypasses the Wall Street-City of London loan sharks. If a medium of exchange is needed, China and Russia will use the tons of gold they are amassing to back a new form of currency similar to the Greenback. Now, who runs Bartertown?

db51's picture

Fuck it.  I raise soybeans.    I could give a flying fuck if they go to $2.00/bushel.   Cause Fed Crop Insurance guarantee for this year is $ 10.50.   After that, fuckem...leave the planter in the fucking shed.   No problem   Starve you little fuckwits.   10.50 a bushel is just breakeven anyway.   If you're a stock broker, bankster or Pol.   this economy is great.   for everyone else it sucks.   Let's crash and buirn the bitch and get it over with

 

Ignorance is bliss's picture

Brazil would fill the gap. No one really wants GMO soy anyway.

Crush the cube's picture

The number one trade item on our side, and not one real infrastructure investment made by the .Gov geniuses in Ag for over 30 years.  They have no interest whatsoever in honest or real trade, let it collapse, as long as DC goes down with it.

Antifaschistische's picture

hey, remember the good ole days...when the US made the high tech and manufactured products....and traded them with the rest of the world for things like banana's and kiwi.

Today...we import the high tech items and we export.......SOYBEANS!!!   What are we...a Soybean republic!!   It's embarassing.