When my son Sam was younger “our thing” was playing basketball in our backyard barn. We started playing one-on-one when he was about seven. The way I would control the game to make it fun, and as his coach to train him, was through rebounds and shot blocks. If he drove the basket with his right hand, he would get his shot blocked, if he drove with is left I’d let him take the layup.
If he shot one three-pointer, I’d only work a little to get the rebound, but if he started shooting “crazy” from the outside, I would take all the rebounds. There was a method to my game and it worked. Now playing at Andrean, he has excellent ball control with both hands and makes mostly smart shot selections.
As he got older, however, eventually his size, speed and skills overtook mine. At first, he didn’t realize this, and as he was used to getting dominated by me, he would play expecting to be dominated. After a while, however, he noticed my huffing and frustration. When this realization was made it was pretty much over for me. We don’t play as much anymore now that he is 16 and busy, but when we do all I have left is my girth to push him around a bit.
This experience is not unlike the experience of the United States and China. For a long time, the U.S. dominated the relationship with the Chinese. It wasn’t a burdensome domination, but one of mutual interest. American businesses and the U.S. government in many ways needed the cheap consumer goods produced by China. These cheap consumer products enabled U.S. corporations to focus on product design and marketing, and also contributed to a long period of low inflation, which I believe enabled the government to borrow and spend more freely.
The Chinese, on the other hand, needed the U.S. market to develop opportunity for their 1.3 billion people, who were migrating from a rural to an urban existence. This transition was fraught with peril for the Chinese government and the jobs provided by exporting to the U.S. were a lifeline.
American corporations were also excited by the prospects of a more affluent Chinese consumer market. Like a permissive parent and in an effort to accommodate this seemingly “win-win” growth process, U.S. policymakers turned a kind of blind eye to some of the more distasteful parts of the economic relationship between the two nations.
The Chinese have long had unfair import practices, unfair investment rules, no interest in honoring U.S. patents or trademarks, non-symmetrical tariffs, and they are experts at currency manipulation. For decades the U.S. dismissed these issues as growing pains that would be worked out over time, but then something happened — the Chinese grew up and started winning some games on their own.
Enter Donald Trump. The President doesn’t come from Washington, D.C., with a bent toward central economic planning. He also doesn’t come from corporate American, with a bent toward globalization. In China he appears to see only the adult child that is still behaving badly. The adult child that has now become a threat on the court.
His public rhetoric says we wants these long-standing policy issues fixed. Private negotiations seem thus far ineffective. This process was supposed to be wrapped up in March, but was punted to May. In Trumpian style, the negotiation process has now become very public. The stock market is not happy.
My opinion is the issues are too ingrained and complex. Trump is subject to elections, Chinese President Xi Jinping is not. My gut feeling tells me the Chinese will eventually allow Trump to save face, giving him an unenforceable win, and nothing will really change, which in the end is probably OK.
The U.S. economy continues to be the envy of the world. I can’t help feeling that every stock market tantrum caused by Chinese trade negotiations might provide a bit of opportunity in its own right.