Looking back it is obvious that neither China nor the Collective West acted in good faith as China opened up for business. Both had rather opposing goals when they decided to cooperate economically.
I've had my dealings with China back in the 1990's during negotiations for a Sino-Dutch joint venture. It soon became apparent who had come better prepared. The Chinese delegation kicked our butts back then.
Years later I ran into an old classmate of mine. He had set up shop in China and ran a business in Chongqing for many years, but when the authorities decided that his company was vital to national interests and he was quickly kicked out of the country.
To be fair; this is not uniquely Chinese. I've heard similar stories about Dutch companies in France and the US. Business can be ruthless especially when national interests and geopolitics are involved.
Chinese policy papers are quite revealing. Beijing knew perfectly well what game the Collective West was playing; setting up a cheap western manufacturing hub in China and then controlling everything by dominating the Chinese financial sector.
You left out the obligatory question, “What would Adam Smith do?” He’d likely say China has a competitive advantage in auto manufacturing because of its superior scale, assuming we call the engineering capabilities a draw. Therefore the US should import cheap Chinese cars and focus its investment dollars on more knowledge-oriented products. Unfortunately that means US underemployment which is a fundamental problem that Smith never tackled. But Donald Trump did, channeling Friedrich List. If you can’t beat ‘em, join ‘em.
Michael, you have told this story well over the years, but the administration and Congress seem ready to ignore or eliminate all the other policy levers we need to follow China’s playbook. Tariffs only with no incentives and no non-market measures will fail spectacularly.
Michael as ever insightful. Thank you for sharing. Perhaps W OEM’s should adopt a JV approach with CN OEM’s. In my opinion this could be a happy compromise. Providing unhindered access to hundreds of millions of consumers simultaneously the host country having ski in the game for the long term. Bundled with a JV would be sharing if technology,R&D plus sourcing of components to a certain percentage from Europe.
All true, though Trump's not really playing the tariff game so much as the headline game. Tariffs inside NAFTA-2.0 that he himself negotiated? That's like tariffs between South Carolina and Illinois, no?
Using tariff as a means to promote industrial policy started with Alexander Hamilton and was practically copied by the rest of the world. Quite clearly, it works. So this is the Trump Administration’s method of reindustrializing the US.
Clockwork logic to a rational conclusion. Well stated.
Top! THX!
Thank you very much. The numbers don;t lie.
Looking back it is obvious that neither China nor the Collective West acted in good faith as China opened up for business. Both had rather opposing goals when they decided to cooperate economically.
I've had my dealings with China back in the 1990's during negotiations for a Sino-Dutch joint venture. It soon became apparent who had come better prepared. The Chinese delegation kicked our butts back then.
Years later I ran into an old classmate of mine. He had set up shop in China and ran a business in Chongqing for many years, but when the authorities decided that his company was vital to national interests and he was quickly kicked out of the country.
To be fair; this is not uniquely Chinese. I've heard similar stories about Dutch companies in France and the US. Business can be ruthless especially when national interests and geopolitics are involved.
Chinese policy papers are quite revealing. Beijing knew perfectly well what game the Collective West was playing; setting up a cheap western manufacturing hub in China and then controlling everything by dominating the Chinese financial sector.
We all know how that worked out.
You left out the obligatory question, “What would Adam Smith do?” He’d likely say China has a competitive advantage in auto manufacturing because of its superior scale, assuming we call the engineering capabilities a draw. Therefore the US should import cheap Chinese cars and focus its investment dollars on more knowledge-oriented products. Unfortunately that means US underemployment which is a fundamental problem that Smith never tackled. But Donald Trump did, channeling Friedrich List. If you can’t beat ‘em, join ‘em.
Michael, you have told this story well over the years, but the administration and Congress seem ready to ignore or eliminate all the other policy levers we need to follow China’s playbook. Tariffs only with no incentives and no non-market measures will fail spectacularly.
Agree. Need the full arsenal.
Michael as ever insightful. Thank you for sharing. Perhaps W OEM’s should adopt a JV approach with CN OEM’s. In my opinion this could be a happy compromise. Providing unhindered access to hundreds of millions of consumers simultaneously the host country having ski in the game for the long term. Bundled with a JV would be sharing if technology,R&D plus sourcing of components to a certain percentage from Europe.
Thanks for this post.
(via Bill)
In 5 minutes of reading I learned a lot about the Chinese car Market and Imports!
All true, though Trump's not really playing the tariff game so much as the headline game. Tariffs inside NAFTA-2.0 that he himself negotiated? That's like tariffs between South Carolina and Illinois, no?
Using tariff as a means to promote industrial policy started with Alexander Hamilton and was practically copied by the rest of the world. Quite clearly, it works. So this is the Trump Administration’s method of reindustrializing the US.
So sad, it’s 2025 now, I couldn’t believe you writing this without being paid by USAID.
Muke Dunne: Is Trump wrong? Perhaps allow BYD to build cars in the US — but only in partnership with o e of the D3.
Trump is not wrong about China. He understands their playbook. Bring them in a a tightly monitored JV with majority US ownership. Reciprocity.