Trade war: “China relies more on trade and loses more”

Former Goldman CEO Lloyd Blankfein: President Trump’s tariffs aren’t a bad idea

• Tariffs are an effective negotiating tool
• Tariffs cause U.S. buyers to switch their purchases to local or non-Chinese companies, causing Chinese companies to lose revenues

By Evelyn Cheng

Containers are stacked on a vessel at the Port of Long Beach in Long Beach, California on July 6, 2018, including some from China Shipping, a conglomerate under the direct administration of China’s State Council.

The United States may be feeling the pain of tariffs now, but they will hurt China in the longer term, said former Goldman Sachs CEO Lloyd Blankfein.
“Tariffs might be an effective negotiating tool,” Blankfein said in a tweet Tuesday evening New York time. 

“Saying it hurts us misses the point. China relies more on trade and loses more.”

Lloyd Blankfein
✔@lloydblankfein
Tariffs might be an effective negotiating tool. Saying it hurts us misses the point. China relies more on trade and loses more. As in a labor strike where mngmnt & workers both get hurt, the process may demonstrate relative strength & resolve & where compromise needs to happen.
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12:23 AM - May 15, 2019
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Trade tensions between the world’s two largest economies escalated in the last week. 

U.S. President Donald Trump’s administration raised tariffs on $200 billion worth of imported goods from China to 25% from 10%. 

In response, Beijing retaliated with duties of up to 25% on $60 billion worth of U.S. goods that are set to take effect on June 1.

In a separate tweet Tuesday, Blankfein said tariffs may cause U.S. buyers to switch their purchases to local or non-Chinese companies. 

Although that will cause the American side to pay slightly more than they do now, he pointed out that as a result, Chinese companies will lose revenues.
“Not great but part of the process to assert pressure to level the playing field,” he said.

Lloyd Blankfein
✔@lloydblankfein
As to who ultimately bears the tariffs cost: US buyers may eventually switch their purchases to domestic or non-Chinese companies (and pay a bit more than now). Chinese companies lose the revenues. Not great but part of the process to assert pressure to level the playing field.
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1:30 AM - May 15, 2019
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Other analysts have noted anecdotally that some non-Chinese companies have already been moving their manufacturing out of the country to Southeast Asia due to rising labor costs.
While the U.S. has a host of demands for China around creating a fairer business environment — including the protection of intellectual property and technology transfer — President Trump has focused on reducing the U.S. trade deficit with China. 

The U.S. is China’s largest trade partner.