The CEO of a U.S.-based global investment firm said Tuesday that POTUS Donald Trump’s tariff regime against China is having the desired effect of both slowing Beijing’s economy while “holding a gun to the head” of a county that is used to enormous economic growth.
On Monday, the Chinese government announced in response to its slowest economic growth since 1990 that it was willing to spend as much as $1 trillion to close the yawning trade deficit with the United States, something that provides the Trump administration with a huge amount of new leverage with which to win concessions with Beijing over the imbalance, Fox Business reported.
“You gotta remember one thing, a strong man like [Chinese] President-for-Life Xi Jinping would not even be negotiating with President Trump, they wouldn’t even come to the table if we weren’t holding a knife to their throat, a gun to their head, if they weren’t in danger because of what we’re doing,” said Donald Luskin, head of TrendMacro.
“The United States is a huge customer of China, and we threatened to disengage with them,” he noted further. “We threatened to throw them into something they’ve never experience before…China simply does not know what a recession looks like.”
Luskin said that recessionary pressures on China’s economy could force large layoffs followed by massive protests and unrest, something the communist government cannot afford if it hopes to stay in power.
“In a command-and-control economy like that where social cohesion is so important, you have to wake up in the morning and salute the Communist Party,” he said, “you get a recession, you get people who get layoffs and pink slips for the first time in their lives, you have to wonder if you’re Xi Jinping, do you got even riot police?”
In that scenario, then, it’s no wonder the Chinese leader is anxious to negotiate with POTUS Trump in order to get the trade situation normalized and the tariffs removed, Luskin added.
“What Trump is asking China to do is to become a bigger, better, stronger economy” so Beijing doesn’t have to rely on tactics like stealing American technology in order to maintain stability, Luskin said.
But if that were to happen, the Communist Party would lose power, “and that’s the sticking point right now,” Luskin said.
As for what a final trade agreement will look like that is beneficial to both sides, Luskin said that China has already given the Trump administration much of what it wanted, including the purchase of more U.S. goods, lowering of barriers, dropping requirements for technology transfers, and changing long-term economic plans.
He also predicted that in the end, the U.S. would get more cooperation from China over North Korea, Iran, and other geopolitical issues that currently cause friction between both countries.
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