Copy of AFF Sentinel V22 #14-China’s Political Strategy for Global Trade Dominance

It’s Not By Accident Cheap Chinese Goods Are Everywhere

Steve Dittmer | AFF Sentinel

Colorado Springs, CO

Originally sent to subscribers 02/20/25

Many folks have assumed that China produces and sells to Americans less expensive goods because they have lots of cheap labor.

Turns out, it’s a lot more complicated than that.

John Carney of the Breitbart Business Digest takes the big picture look at the overall economic and political strategy China has employed to engender the resentment of many countries, including the U.S., for creating massive trade surpluses with other countries.



Carney said Michael Pettis, a finance professor at Peking University, is an expert observer of China’s trade model: suppress domestic consumption, enable manufacturing and their exports and export the cost of the market distortion to other countries, especially America.

China directs income away from households by suppressing wages, limiting capital outflows and manipulating interest rates, Pettis explained. Wages are kept low and interest rates low so citizen’s savings pay little, while capital is available and cheaper for industrial uses. Citizens cannot invest elsewhere so any savings are kept inside the state-controlled financial system. That provides capital for industrial overcapacity and keeps it away from domestic consumption. And to make sure export prices are low, the government intervenes in the currency markets when necessary to keep the yuan undervalued.

So the Chinese economy produces far more than it consumes, with domestic demand and wages muffled. Goods at artificially low prices flood the world, and massive trade surpluses accumulate with other countries. The distortions of their cost of production is exported to other countries, Pettis points out.

This setup undercuts American manufacturing, kills jobs here and U.S. consumers -- while getting cheaper goods -- unwittingly finance the whole scheme through huge trade deficits. It damages American industry, workers and, ultimately, American national security.

If world trade was truly free trade -- without restrictions or trade barriers or manipulation -- this would balance out over time. Chinese wages would rise, domestic consumption would rise, the cost of Chinese goods would rise and Chinese currency would strengthen. But since global trade does not operate freely and China’s government makes sure that its economy is controlled and the Chinese Communist Party benefits, the situation will not change without intervention.

The Trump Administration sees tariffs as the tool it can use to force some balance back into the system.

Carney calls our present state “an unsustainable rigged system created by state intervention.

“And tariffs are not a distortion. They’re a correction -- a necessary counterweight to the economic distortions China and other mercantilist nations have already imposed on the system,” Carney said.

Tariffs, in short, aren’t the problem. They’re the solution,” he said.

Of course, the situation in North America is different. Trump has made it plain that his priorities are illegal immigration and drug and human trafficking. Those factors are overriding national security concerns. They need to be addressed before anything else.

But the jobs and concerns of American businesses will not be ignored for too long. We need the free flow of working people, goods and capital between our three countries. And Trump has no desire to raise costs and depress wages for Americans.

So, hopefully, the national security concerns will be dealt with within the 30 days Trump has set.

Our address: Agribusiness Freedom Foundation, P.O. Box 88179, Colorado Springs, CO. 80908.

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