04-04-2018, 09:20 PM
*** 5-Apr-18 World View -- China on path to repeat Japan's experience after Smoot-Hawley Tariff Act of 1930
This morning's key headlines from GenerationalDynamics.com
****
**** China's tariff retaliation plan would devastate China's economy
****
![[Image: g180404b.jpg]](http://Media.GenerationalDynamics.com/ww2010/g180404b.jpg)
A Chinese farmer gathering bundles of wheat (Getty)
The Trump administration imposed tariffs earlier this week on some
1,300 products in a broad range of sectors, from electronics
components to medical devices, and from false teeth to detergent
chemicals.
When China retaliated on Wednesday, its list contained only 106 items,
mostly agricultural products. American soybeans as the number 1
target, followed by corn products, two types of cotton exports, wheat
and meat. The list also includes frozen orange juice and whiskey,
tobacco and cars. As a number of analysts have pointed out, while the
Trump administration is targeting strategic products, China's
reciprocal tariffs are not strategic but political, specifically
targeting products that are developed in states where Trump is
politically popular, in the hope of applying political pressure to
Trump to drop the tariffs altogether.
What seems clear from both sets of items is that these mutual tariffs
may harm small segments of America's economy, they will devastate
China's entire economy, mainly because of China's enormous and
growing food security problem.
China has only 7% of the world's farmlands, but has to feed 20% of the
world's population. In order to improve yields, China's farmers have
been using massive amounts of chemical fertilizers. The increasing
use of these fertilizers has followed the economy Law of Diminishing
Returns, in that additional use of fertilizers has been less and less
effective and even counterproductive, as some farmland is being
poisoned with overfertilization.
Exacerbating the shortage of farmland is the shortage of water.
China's available water supply per person is only 25% of the
average available globally. In parts of China, groundwater is
being depleted for agriculture. The growing and excessive use
of fertilizer and groundwater indicate that China's domestic
ability to feed its growing population is lessening.
That means that China has to import enormous amounts of food from
other countries. Many people were surprised to see soybeans at the
top of China's tariff list, because importing massive amounts of
soybeans is essential to China's economy. Of all the globally traded
soybeans in the world, China imports 60% of them, including $12
billion worth of American soybeans.
If China stopped buying American soybeans, it would be almost
impossible to replace them from another source. If China did find
another source, perhaps in Brazil or Argentina, then these countries
would raise their own soybean prices -- and, indeed, soybean futures
prices in Brazil have already been increasing. But then the people
who could no longer get their soybeans from Brazil or Argentina would
turn to America's soybeans.
On the other hand, if China kept purchasing American soybeans but
imposed its threatened 25% tariff, then the cost of the soybeans would
be prohibitive for many Chinese, and would lead to price inflation.
And price inflation would lead to social instability. China's history
is filled with huge, massive internal rebellions (civil wars), the
most recent of which were the White Lotus Rebellion (1796-1805), the
Taiping Rebellion (1850-64) and Mao's Communist Revolution (1934-49).
China is overdue for a new massive civil war, and a soybean tariff
could be the trigger. Xinhua
and Reuters and Nature and
Zero Hedge
****
**** China on path to repeat Japan's experience after Smoot-Hawley Tariff Act of 1930
****
Chinese officials keep saying that they don't want a trade war, but
they're not afraid of a trade war. Well, the first half of that
statement is true, anyway, but the second half is definitely not true.
America's economy would be slightly hurt, but China's economy would be
devastated.
When America passed the Smoot-Hawley Tariff Act in 1930,
during the Great Depression, it was particularly devastating
to Japan, as it cut off Japan's exports to America of silk,
its greatest cash crop.
I've written many times in the past that the 1930 Smoot-Hawley Tariff
Act could be considered the beginning of World War II, so I was
interested in a speech given by Japan's prime minister Shinzo Abe in
2015, commemorating the 70th anniversary of the end of WW II, where he
explained how Japan was affected by a "major blow" -- the Smoot-Hawley
act -- and how it led to Japan's invasion of Manchuria a year later:
<QUOTE>"[After World War I] Japan kept steps with other
nations. However, with the Great Depression setting in and the
Western countries launching economic blocs by involving colonial
economies, Japan’s economy suffered a major blow
[Smoot-Hawley]. In such circumstances, Japan’s sense of isolation
deepened and it attempted to overcome its diplomatic and economic
deadlock through the use of force. Its domestic political system
could not serve as a brake to stop such attempts. In this way,
Japan lost sight of the overall trends in the world.
With the Manchurian Incident, followed by the withdrawal from the
League of Nations, Japan gradually transformed itself into a
challenger to the new international order that the international
community sought to establish after tremendous sacrifices. Japan
took the wrong course and advanced along the road to war.
And, seventy years ago, Japan was defeated."<END QUOTE>
The Smoot-Hawley act devastated Japan's silk industry, and its entire
economy, causing it to take desperate measures a year later, invading
Manchuria. Later, America and the League of Nations imposed a
punitive oil embargo on Japan in 1941, and just a few months later,
Japanese warplanes bombed Pearl Harbor.
It's quite possible that we're on a similar path with China today.
China's economy is already in dire straits, with huge debt bubbles
that could burst at any time, and anything resembling a trade war
could lead to social instability, which would cause China to take
desperate measures, such as invading India, Japan, Vietnam or the
Philippines.
One could argue that China is a victim. They were victimized by
Americans and the Europeans, who made it too easy for the Chinese to
cheat on trade with illegal tariffs and to steal American's
intellectual property, with the result that China became addicted to
the drugs of illegal tariffs and stealing intellectual property. Now
those drugs are being taken away, and China is at risk of showing the
signs of drug withdrawal which, in this case, means launching a world
war.
China is on a very dangerous path -- to itself and to the world.
China's illegal tariffs and stealing intellectual property will not be
allowed to continue. It's up to China to fix this problem, but we
know that the Chinese people are so nationalistic and so xenophobic
that they will not.
Generational Dynamics predicts that the approaching Clash of
Civilizations world war will pit China, Pakistan and the Sunni Muslim
countries against the US, India, Russia and Iran. In the Mideast,
Generational Dynamics predicts a full-scale Mideast war, pitting Jews
against Arabs, Sunnis against Shias, and various ethnic groups against
each other. Cato Institute
Related Articles
KEYS: Generational Dynamics, China, Brazil, Argentina,
White Lotus Rebellion, Taiping Rebellion, Mao's Communist Revolution,
Japan, Smoot-Hawley Tariff Act, Shinzo Abe,
Manchuria, Manchurian Incident, League of Nations
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
This morning's key headlines from GenerationalDynamics.com
- China's tariff retaliation plan would devastate China's economy
- China on path to repeat Japan's experience after Smoot-Hawley Tariff Act of 1930
****
**** China's tariff retaliation plan would devastate China's economy
****
A Chinese farmer gathering bundles of wheat (Getty)
The Trump administration imposed tariffs earlier this week on some
1,300 products in a broad range of sectors, from electronics
components to medical devices, and from false teeth to detergent
chemicals.
When China retaliated on Wednesday, its list contained only 106 items,
mostly agricultural products. American soybeans as the number 1
target, followed by corn products, two types of cotton exports, wheat
and meat. The list also includes frozen orange juice and whiskey,
tobacco and cars. As a number of analysts have pointed out, while the
Trump administration is targeting strategic products, China's
reciprocal tariffs are not strategic but political, specifically
targeting products that are developed in states where Trump is
politically popular, in the hope of applying political pressure to
Trump to drop the tariffs altogether.
What seems clear from both sets of items is that these mutual tariffs
may harm small segments of America's economy, they will devastate
China's entire economy, mainly because of China's enormous and
growing food security problem.
China has only 7% of the world's farmlands, but has to feed 20% of the
world's population. In order to improve yields, China's farmers have
been using massive amounts of chemical fertilizers. The increasing
use of these fertilizers has followed the economy Law of Diminishing
Returns, in that additional use of fertilizers has been less and less
effective and even counterproductive, as some farmland is being
poisoned with overfertilization.
Exacerbating the shortage of farmland is the shortage of water.
China's available water supply per person is only 25% of the
average available globally. In parts of China, groundwater is
being depleted for agriculture. The growing and excessive use
of fertilizer and groundwater indicate that China's domestic
ability to feed its growing population is lessening.
That means that China has to import enormous amounts of food from
other countries. Many people were surprised to see soybeans at the
top of China's tariff list, because importing massive amounts of
soybeans is essential to China's economy. Of all the globally traded
soybeans in the world, China imports 60% of them, including $12
billion worth of American soybeans.
If China stopped buying American soybeans, it would be almost
impossible to replace them from another source. If China did find
another source, perhaps in Brazil or Argentina, then these countries
would raise their own soybean prices -- and, indeed, soybean futures
prices in Brazil have already been increasing. But then the people
who could no longer get their soybeans from Brazil or Argentina would
turn to America's soybeans.
On the other hand, if China kept purchasing American soybeans but
imposed its threatened 25% tariff, then the cost of the soybeans would
be prohibitive for many Chinese, and would lead to price inflation.
And price inflation would lead to social instability. China's history
is filled with huge, massive internal rebellions (civil wars), the
most recent of which were the White Lotus Rebellion (1796-1805), the
Taiping Rebellion (1850-64) and Mao's Communist Revolution (1934-49).
China is overdue for a new massive civil war, and a soybean tariff
could be the trigger. Xinhua
and Reuters and Nature and
Zero Hedge
****
**** China on path to repeat Japan's experience after Smoot-Hawley Tariff Act of 1930
****
Chinese officials keep saying that they don't want a trade war, but
they're not afraid of a trade war. Well, the first half of that
statement is true, anyway, but the second half is definitely not true.
America's economy would be slightly hurt, but China's economy would be
devastated.
When America passed the Smoot-Hawley Tariff Act in 1930,
during the Great Depression, it was particularly devastating
to Japan, as it cut off Japan's exports to America of silk,
its greatest cash crop.
I've written many times in the past that the 1930 Smoot-Hawley Tariff
Act could be considered the beginning of World War II, so I was
interested in a speech given by Japan's prime minister Shinzo Abe in
2015, commemorating the 70th anniversary of the end of WW II, where he
explained how Japan was affected by a "major blow" -- the Smoot-Hawley
act -- and how it led to Japan's invasion of Manchuria a year later:
<QUOTE>"[After World War I] Japan kept steps with other
nations. However, with the Great Depression setting in and the
Western countries launching economic blocs by involving colonial
economies, Japan’s economy suffered a major blow
[Smoot-Hawley]. In such circumstances, Japan’s sense of isolation
deepened and it attempted to overcome its diplomatic and economic
deadlock through the use of force. Its domestic political system
could not serve as a brake to stop such attempts. In this way,
Japan lost sight of the overall trends in the world.
With the Manchurian Incident, followed by the withdrawal from the
League of Nations, Japan gradually transformed itself into a
challenger to the new international order that the international
community sought to establish after tremendous sacrifices. Japan
took the wrong course and advanced along the road to war.
And, seventy years ago, Japan was defeated."<END QUOTE>
The Smoot-Hawley act devastated Japan's silk industry, and its entire
economy, causing it to take desperate measures a year later, invading
Manchuria. Later, America and the League of Nations imposed a
punitive oil embargo on Japan in 1941, and just a few months later,
Japanese warplanes bombed Pearl Harbor.
It's quite possible that we're on a similar path with China today.
China's economy is already in dire straits, with huge debt bubbles
that could burst at any time, and anything resembling a trade war
could lead to social instability, which would cause China to take
desperate measures, such as invading India, Japan, Vietnam or the
Philippines.
One could argue that China is a victim. They were victimized by
Americans and the Europeans, who made it too easy for the Chinese to
cheat on trade with illegal tariffs and to steal American's
intellectual property, with the result that China became addicted to
the drugs of illegal tariffs and stealing intellectual property. Now
those drugs are being taken away, and China is at risk of showing the
signs of drug withdrawal which, in this case, means launching a world
war.
China is on a very dangerous path -- to itself and to the world.
China's illegal tariffs and stealing intellectual property will not be
allowed to continue. It's up to China to fix this problem, but we
know that the Chinese people are so nationalistic and so xenophobic
that they will not.
Generational Dynamics predicts that the approaching Clash of
Civilizations world war will pit China, Pakistan and the Sunni Muslim
countries against the US, India, Russia and Iran. In the Mideast,
Generational Dynamics predicts a full-scale Mideast war, pitting Jews
against Arabs, Sunnis against Shias, and various ethnic groups against
each other. Cato Institute
Related Articles
- Japan's Shinzo Abe blames WW II on the Smoot-Hawley Tariff act (15-Aug-2015)
- How China would lose a war with the United States (22-Mar-2018)
- Border Adjustment Tax versus the 1930 Smoot-Hawley Law (25-Feb-2017)
- The bubble that broke the world (09-Oct-2007)
- Explanation of Price/Earnings ratio and Stock Valuations (28-Aug-2015)
KEYS: Generational Dynamics, China, Brazil, Argentina,
White Lotus Rebellion, Taiping Rebellion, Mao's Communist Revolution,
Japan, Smoot-Hawley Tariff Act, Shinzo Abe,
Manchuria, Manchurian Incident, League of Nations
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
