A brief note on Trade Wars.

As of the end of the 1990s, where China was gradually expanding its pressure on world trade, the “Japanese Threat” constantly feared by America has already begin to fade away. When the Japans began buying assets from all over the world thanks to their huge trade surplus, American film industry started to produce movies encompassing violent antagonism against Japan while the anti-Japanese sentiment in the United States was simultaneously growing.

However, US’s trade deficit with Japan had begun decreasing significantly through the middle of the 1990s; instead their trade deficit with China started to grow rapidly. The fact that the Japanese were buying everything in America, from golf courses to art works, had caused antipathy against Japan among Americans, encouraging Hollywood to make humorous yet sometimes harsh movies, mostly based upon unfounded scripts.

America’s growing hegemony over the world through its tech brands like Apple and Microsoft, and finally taking the throne with Google and the Facebook-Twitter-Instagram trio, had put Japan out of action. Struggling with financial difficulties, Sony was trying to sell PlayStation as a separate brand. Struck in a nuclear attack by the U.S., Japanese people had entered one of toughest decades of their lives.

On the other hand, although China’s foreign trade surplus with America was constantly growing each year, this undeniable financial success of theirs has never been turned into a book or a screenplay; however, Chinese people have appeared as “saviours” in dystopian movies. For a very simple reason: some of the world’s most well-known American brands are among businesses exporting goods and services to China. It is also a well-known fact that American companies choose China for manufacturing products.

As a matter of fact, America was having a very large trade deficit with China before WW2. In order to eliminate this problem, Roosevelt, who would later become US President, had suggested American business people should buy large quantities of silver, referring to the correlation between Chinese Yuan and Silver. Having become very expensive due to ever-increasing silver prices, Yuan has first caused a deflation in Chinese economy and then a depression. Troubled by devastating financial crisis, China had also to deal with hyperinflation.

When the WW2 broke out, China was struggling with a major crisis. That is why they failed to notice the approaching Japanese threat. Eventually, Manchuria was invaded by Japan but saved by America. Although this might seem quite appealing to conspiracy theorists and enthusiasts, this is a brief and true summary of what happened back then.

“But, what is Trump trying to do?”

Using the same old argument as an excuse, today, the U.S. ignited trade wars once again. This time however, American companies may face difficulties in China. If one day they choose to return home, they won’t possibly be able to have their products manufactured at the same costs they would normally be incurred in China. I say, “Have their products manufactured” since these businesses do not have manufacturing facilities of their own. They usually enter into contract manufacturing agreements with Chinese suppliers. Therefore, manufacturing products in America seems drastically irrational in terms of costs, not to mention it is almost impossible to establish 50-60.000 worker capacity factories in the United States.

Undoubtedly, Trump is perfectly aware of the fact I just mentioned above. I certainly do not think that he is producing mercantilist arguments supporting that approximately 290 million Americans can actually lead a self-sufficient living. What I think is Trump is probably trying to bring the third world countries to heel by using the fact that US companies provide employment to a large number of people overseas.

On the other hand, the fact that Turkey is imposing additional tariffs on American brands whose products are made in China amounts to just nothing. Even though manufactured in China, consumers still continue to buy these expensive luxury brands.

Here’s my interpretation of all of this: US Government is trying to dislocate the building stones that conserve the current system. As we all know that liberal trade brings peace and prosperity, Trump either wants conflict and tension or he is trying to force the Pollyanna attitude on everyone. So, in the process, Turkey should act very wisely and carefully.