The greatest change in a century: from trade to consumption, history is always strikingly similar

Luo sir's words

2024-05-16 23:11Posted in Sichuan Workplace Creators

We are the biggest beneficiaries of globalization, and this is the most important point for us to defend the current international order; But the new coronavirus, the Russia-Ukraine conflict, has fundamentally changed this.

On May 14, the White House announced that it would impose tariffs on $18 billion of products imported from China, of which the tariff on electric vehicles will rise from 25% to 100%.

This is the first time that the United States has imposed tariffs on China, and it will not be the last.

As early as the Trump era, the United States unilaterally launched multiple rounds of trade wars, raising tariffs on $300 billion of goods imported from the mainland, and this action continued until Biden took office, and also largely retained these tariffs, only exempting some of these goods.

Judging from the actions of the two US presidents who still impose tariffs on China, we can fully expect that in the next few decades, Sino-US economic and trade relations may go through a painful period, and tariff and trade barriers may also become normalized.

This is a very important and important change, and in my opinion, it is no less important than the introduction of a market economy and opening up to the outside world.

The reason why it is important is that while we continue to open up to the outside world, Europe and the United States are beginning to prepare to "close their doors".

This is a major change unseen in a century.

The greatest change in a century: from trade to consumption, history is always strikingly similar

The past of Sino-US economic and trade relations

Our economic and trade relationship with the United States is almost equivalent to our global connection with the world.

Many people say that we can still live without Europe and the United States, but those who can say this obviously do not realize what position we are in in a globalized world.

To put it mildly, last year's trade between China and Russia hit a new high, but it was only more than $200 billion; You must know that at the peak of Sino-US economic and trade relations, the trade volume was as high as 800 billion US dollars.

But this is only the Sino-US economic and trade volume, if you continue to count the EU's 800 billion euros of trade, that year is a trillion US dollars, so the importance of the European and American markets is irreplaceable by any country and any market on the earth today.

We can say that since we introduced a market economy and started to open up to the outside world, hundreds of millions of consumers in Europe and the United States have been able to enjoy high-quality and low-cost goods by relying on cheap labor.

In turn, relying on the strong consumer markets in Europe and the United States, it has also fed hundreds of millions of people on the mainland, who have come from the countryside to the cities without any skills, they may be assembly line workers, or construction workers, but behind them are inseparable from the wave of globalization.

At the same time, when the mainland did not introduce a market economy, the consumption power of Europe and the United States still existed and was strong; In other words, globalization can shape a "world factory" at will, but it cannot shape a market with the consumption power of Europe and the United States.

There is no doubt that we are the biggest beneficiaries of globalization.

And now, the international order has undergone some changes, globalization is no longer purely market-centric, but more focused on security, at this time Europe and the United States began to risk the supply chain, Yellen wants to "friendly shore outsourcing", in essence, all in order to slowly "decouple" from us.

Although Europe and the United States deny decoupling, supply chain de-risking and high-tech bottlenecks are basically the meaning of decoupling.

The change in the international order, the new coronavirus and the Russia-Ukraine conflict are among the most important factors.

Behind the prosperity of globalization is commercial transactions, and the most feared and feared thing about business activities is actually war, and any war will destroy one economy or another.

In the more than two years since the Russia-Ukraine conflict, almost all Western companies operating in Russia have been withdrawn, and at the same time, Europe and the United States have become unprecedentedly united and focus more on security.

This is the situation we see today, the United States has imposed semiconductor necks, chip blockades, and increased tariff barriers on the mainland, and behind these behaviors, they all come from the oldest two words: security.

Looking back on the past is an important lesson that helps us to clarify the fundamental changes in thinking in Europe and the United States.

In a highly modern business society, the cost of military conflict is very high; Therefore, the replacement of military conflicts with trade tariffs has become commonplace, and the United States once fought a trade war against Japan at the peak of Japan's economy, and today, this role has become ours.

In the face of a number of powerful enemies in Europe and the United States, our "hard life" may have just begun.

The current situation of Sino-US economic and trade

On Tuesday, four years after U.S. Trade Representative Katherine Tai has been reviewing the $300 billion worth of tariffs on the mainland during the Trump era, she released a 193-page review report.

According to the report, the limited tariffs have encouraged the mainland to take steps to eliminate some of the behaviors and practices associated with technology transfer; Among them, the tariffs on China have a slight negative impact on the overall U.S. economy; In addition, the tariffs help the U.S. reduce imports from China and increase imports from allies, strengthening the resilience of U.S. foreign supply chains.

The report was followed by a new $18 billion tariff on China, including 13 items, including lithium-ion batteries, solar cells, syringes and needles in addition to electric vehicles.

The White House announcement said the move was intended to protect American workers and businesses.

The $18 billion tariff will not have much impact on the mainland's economy and employment in the short term.

Geely Automobile exported 2,217 vehicles to the United States in the first quarter of this year, and the impact of U.S. tariffs on solar panels may be greater than that of electric vehicles.

At present, most mainland solar companies export their products to the United States from third countries to circumvent U.S. tariff barriers. The share of mainland solar panel manufacturers in the U.S. market is about 60%, so the U.S. imposed tariffs on solar panels are likely to affect a number of mainland companies.

More importantly, after the US increases tariffs on Chinese automobiles to 100%, the EU may soon introduce similar measures, and the EU market is a market that cannot be lost for the mainland auto industry.

At the beginning of this year, the growth rate of the mainland electric vehicle market has begun to slow down, and the superimposed automobile price war has further led to fierce competition in the domestic automobile market.

At this time, if both Europe and the United States impose tariffs on automobiles, it will undoubtedly lead to internal and external difficulties for mainland enterprises.

The European Union is the most important market for mainland automotive exports. According to the data of the National Passenger Car Market Information Association, Europe will account for 38% of the 1.2 million electric vehicles exported from the mainland in 2023, far exceeding other regions.

The European Union launched a trade investigation on mainland automobiles as early as October last year, and this month the executive vice president of the European Commission also hinted that the EU's countervailing investigation into mainland electric vehicles is advancing, and tariffs on mainland electric vehicles may be imposed before the summer vacation.

Once the EU follows the US to impose tariffs on automobiles, this will undoubtedly be very bad news.

There are a large number of blue-collar workers standing behind the automobile industry, and there are tens of millions of jobs involved.

More importantly, the two sides have not reached a consensus on the issue of industrial surplus.

Su Yue, an economist at the Economist Intelligence Unit, said that the current problems of electric vehicles in the mainland are disorderly competition and low capacity utilization, while Europe and the United States are more concerned about the rapid growth of overall production capacity and output, which can also explain why Yellen is worried about the oversupply of electric vehicles in the mainland.

According to the Economist Intelligence Unit, there will be more anti-subsidy and anti-dumping investigations against mainland manufacturing this year, especially as inflation concerns in many advanced economies wane, and these investigations may also extend to overseas factories on the mainland and even in ASEAN countries.

This is a major change unseen in a century.

The future of U.S.-China economic and trade trade

Two black swan events, a new coronavirus, and a Russia-Ukraine conflict, may determine the pattern of the world in the next 50 years or even a hundred years.

According to Pew, a polling agency, there is a growing negative perception of us in the United States.

Furthermore, with the arrival of this year's election in the United States, whether it is Biden or Trump, in order to win the support of more voters, the rhetoric on China on trade issues may also be more hawkish.

Of course, Trump is undoubtedly crazier than Biden; Mr. Trump said on the campaign trail that if elected, he would impose 60 percent tariffs on all Chinese goods, and he singled out that if he loses the election in November, the U.S. auto industry will face disaster.

If the 60% tariff is really imposed, not to mention how much damage the US economy will suffer, it will be a huge disaster that we alone will not be able to bear, and the wave of unemployment may come and go like a tsunami.

Again, the focus is on the automotive industry.

On August 16, 2022, Biden officially signed the Inflation Reduction Act, which focuses on supporting the development of clean energy such as electric vehicles and photovoltaics, and consumers can receive up to $7,500 in subsidies for new cars assembled in North America.

In the same year that the United States started subsidies, the mainland's industrial subsidies for new energy vehicles began to be canceled, and the mainland's subsidies for each new energy vehicle were also between 1,000 and 2,000 US dollars, with subsidies of 150 billion yuan in 12 years.

There is no doubt that the future of globalization is becoming less and less global, it is becoming more fragmented, more fragmented, or more like globalization, when Europe and the United States began to de-risk the supply chain, Vietnam, India, the Philippines and Thailand have become new investment hotspots.

In the future, Europe and the United States will investigate and tariff more and more industries on the mainland, which will also test the mainland's own internal digestion ability more and more.

If we can't sell what we produce and can't digest it internally, then it means a big crisis.

The automotive industry is particularly dangerous.

At present, the production capacity of the mainland automobile industry is as high as 30 million vehicles a year, but considering that the family income in the mainland is still relatively low, there are only 460 million people with a monthly income of more than 3,000, which is a very significant challenge for car companies.

But cars are different from real estate, and the house-price-to-income ratio of real estate is so high, which shows that there is a bubble in real estate; In the case of the per capita income of the mainland is generally not high, the price war of car companies can only continue to roll in, which also leads to the profitability of domestic car companies, especially new energy car companies.

Under the pressure that the internal new energy vehicles have not yet fully realized profitability, once Europe and the United States begin to raise the threshold of trade tariffs, then the pressure on car companies will naturally be great.

Looking at the US-China trade war from a longer-term perspective, we also need to think about another issue: that is, cost.

Over time, our per capita income may be higher or stagnant; But one thing is almost certain: the US-China trade war will continue, and the US National Defense Strategy has long defined us as a "systemic competitor."

Although Biden has repeatedly claimed that there is no intention of conflict, only fair competition.

But competition itself also has a price and a cost.

With uncertainty about our per capita income, households will simply put more of their income in the bank instead of turning it into consumption; In the past, the consumption power of the European and American markets was very strong, which indirectly helped the mainland's foreign trade industry to make a lot of money.

But what about now?

Under the superposition of internal local debt, real estate downturn and sluggish consumption recovery, the external economic and trade environment has undergone a fundamental change, and when globalization becomes more dispersed and fragmented, it may be safer and more diversified for Europe and the United States.

But for us, in the long run, it's a disaster.

When ordinary people's jobs are becoming more and more difficult to find, income growth is getting slower and slower, and the workplace is becoming more and more involuted, it may be difficult for us to compare our personal circumstances with the torrent of the times, but in a sense, it is the torrent of the times that creates personal opportunities.

In the past, under our opportunities and rapid growth, there were opportunities everywhere; Now our opportunity has become under high-quality growth, and there is involution everywhere.

It will be difficult in the future, especially when Europe and the United States begin to suppress us.

Europe and the United States have shaped the system of globalization, and in a sense, they are also able to redefine globalization, and that is the most terrifying part.

end.

Author: Luo sir, concerned about the economy, society and everything in our world, curious about the logic behind the development of things, optimistic pessimist.

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