The Daily View: The second loss of China
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THE “loss of China”, as the victory of Mao Zedong was somewhat arrogantly dubbed by the American foreign policy establishment, was a source of tears in Washington for decades. It even ranks among the proximate causes of McCarthyism.
Rapprochement only got underway with staunch anti-communist Richard Nixon’s 1972 visit to the late dictator, a trip so successful an opera was written about it.
Jimmy Carter built on that opening by formally switching diplomatic recognition from Taipei to Beijing seven years later, effectively gifting a communist state a seat on the UN Security Council.
Bill Clinton decreed permanent normal trade relations between the two countries in 2000, and the following year China joined the World Trade Organization.
But things only went smoothly until they didn’t. Donald Trump’s first term saw the introduction of selective tariffs on Chinese products, a policy extended under Joe Biden.
Under Trump 2.0, the words “permanent¨, “normal” or “trade relations” are no longer defined with quite the precision of Merriam-Webster’s Collegiate Dictionary.
After several rounds of executive orders and tit-for-tat responses, the US tariff on Chinese goods now stands at 145%, with some exemptions, and the Chinese tariff on imports from the US at 125%. Or at least they did last time I checked.
The animosity between the world’s largest economy by nominal GDP and the world’s largest economy by purchasing power parity is going to have a massive impact on the shipping industry, especially for owners with exposure on the transpacific trades.
Lloyd’s List journalists have been unpacking the likely implications, and they don’t look good.
Our Hong Kong colleague Cichen Shen points to a surge in blank sailings, as carriers rush to cut capacity in the face of a collapse in booking volumes.
The number of available slots fell by getting on for 200,000 teu between week 10 and week 15, he found. The percentage decline for US east coast is even starker.
Greg Miller, based in New York, listened to a press conference last Friday with speakers including the executive director of the port of Los Angeles.
“Some globally famous brands have hit the pause button on shipments out of China for the next couple of weeks, and maybe beyond,” Gene Seroka warned.
“Folks are not shipping out of China right now, because they’re not going to pay two and a half times [the cost] for those goods.”
Both the stories are well worth reading. It may be that the era in which nobody let ideological differences or even military rivalry get in the way of the bottom line has gone for good.
Then again, a deal which saw one side supply the other with both an inexhaustible supply of low-cost consumer goods and inexhaustible sums of money to pay for them was never going to last forever.
America appears to have lost China a second time. This time round, the economic consequences could prove vastly more costly.
David Osler,
Law and marine insurance editor, Lloyd’s List