Legendary Economist Gary Shilling Says The US Will Win The Trade War



Gary Shilling, legendary economist: The US will win the trade war

  • Dr. Gary Shilling says that when it comes to trade, the buyer has the upper hand when there's plenty of supply. And in the scenario of the global trade war, the US is the buyer.
  • Shilling says it's possible that China's President Xi will "go to the mat" and things could get nasty. But ultimately, he believes the US will end up winning the trade war.

Dr. Gary Shilling, the president of A. Gary Shilling &Co.,spoketoBusinessInsidereditor-at-largeSaraSilversteinabouttheescalatingtradetensionsbetweentheUSandChina.Followingisatranscriptofthevideo.

SaraSilverstein:AndwhatdoyouthinkaboutTrump'stradewar?What'stheoutcomegoingtobe?

GaryShilling:Here'sthepointthatIcontinuetomake.Whenyou'vegotplentyofsupplyintheworld,andIthinkyoudo—plentyofindustrialcapability,plentyofrawmaterialsandsoon—it'sthebuyerthathastheupperhandnottheseller.Thebuyerhastheultimatepowerandwho'sthebuyer?USisthebuyer,Chinaistheseller.Andbesidesthat,ifyousay,ifweweren'tbuyingallthoseconsumergoodsfromChina,andyouandIenjoythem,they'recheap,they'regreat.Butifweweren'tbuyingthem,wherewouldChinasellthem?Theyhavenootherplacetosellthem,andinthemeanwhile,China'sgrowthisslowing.

They'vegotaproblemofhugedebtexpansionthey'retryingtocurb,they'retryingtodealwithashadowlending—ashadowbankingsystemandsoonandsoforth.Chinaisn'tgoingtocollapseobviously,butIthinkinthistradewar,thattheUShastheupperhand.

Ifyoulookathowthiswholethingdeveloped,afterWorldWarII,therestoftheworldwasprettymuchinashesandwewerepromptlyintotheColdWar,soIthinkthatimplicitlyorexplicitly,webasicallysaid,"WewillletJapanandEuropeexportfreelyintotheUS,"becausethatgavethemthegrowthtoreviveinapostwareraandthatwascheaperforusthangarrisoningevenmoreUStroopsaroundtheworldandhavingmoreborderwars.Well,thatwasfine,butthatera'sover,andglobalizationhasreplacedit,soit'sanentirelydifferentscene,andIthinkasaresult,youhavethissituationwhereChina—China,youknow,grewbasicallythroughexportsandtheywenttoEuropeandNorthAmerica.

ChinesePresidentXiJinpingReuters/Pool

Butyouknow,theydiditwithsomeratherunderhanded—we'dletthemintotheWorldTradeCenterin2001andtheybasicallyhavenotfulfilledtheirpromises,theyhavenotopeneduptheirtechnology,they'renotopeninguptoourinvestments,theystealourtechnology,theydemandtechtransfersforcompaniesthatwanttooperateinChinaandsoon.Andsoyou'vegotasituationnowwhereChinaisbasicallyplayingbytheoldgame,wheneverybodycouldexporttotheUS,butnowwhenyouseetheunemploymentproblem,nogrowthandpurchasingpowerfortheaverageguy—thenon-supervisoryandproductionemployees— no growth in real incomes for a decade and that has changed the whole scene and I think that's really what has gotten Trump elected and he's basically saying, "Hey wait a minute. We've got the upper hand here and we're going to go ahead."

I mean, people say nobody wins trade wars. Yeah, in the short-run you don't, but in the long-run ... the US will be better off.

Now, they could go to the mat. Xi, who is basically the president for life in China, and Trump, he won't be around forever of course, but they could go to the mat and you could get a really nasty, all-out trade war and a serious global recession. I'm not predicting that. I think they probably will settle and China will begrudgingly give ground. They'll import more US goods, they'll ease up on required tech transfers, steal less of it. They're not going to change their views entirely, but I think under pressure, they probably will give way and we'll end up winning the trade war.

I mean, people say nobody wins trade wars. Yeah, in the short-run you don't, but in the long-run, if it's a matter of changing what has been the world exporting to the US and the US buying it and what do we do? We give them paper. That's why they own half of our treasuries. I think that is being reversed and in the long-run, the US will be better off.






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Date: 14.12.2018, 20:43 / Views: 94394