Why Economist Gary Shilling Says the U.S. Will Win the Trade War

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Why Economist Gary Shilling Says the U.S. Will Win the Trade War

Many investors believe that the trade war between the United States and China will have long-term consequences for the country, but economist A. Gary Shilling, head of economic consulting and forecasting business A. Gary Shilling & Co., disagrees. “Nobody wins trade wars, they say. Yes, in the short term, you don’t, but in the long run…the United States will benefit “Dr. Shilling said this in a recent interview with Business Insider.

“When there is enough of supply in the globe, as I believe you do, the buyer has the upper hand over the supplier. The ultimate power is held by the buyer, and who is the buyer? The United States is the buyer, while China is the vendor. Where would China sell all those consumer products if we didn’t purchase them from them? They don’t have somewhere else to sell them, and China’s GDP is decreasing “Shilling was added.

His remarks come as other commentators predict mounting economic and market concerns that are expected to be exacerbated by a lengthy trade war, as outlined in the table below.

Significance for Investors

Shilling is well-known as a contrarian economic and financial pundit, a columnist for Forbes (since 1983) and Bloomberg, a regular guest on CNBC and Bloomberg TV, and the author or co-author of many books. Among his most notable forecasts: in the late 1970s, Shilling predicted that, contrary to popular belief, high inflation would last for many years, making tangible assets the best investment options, and that policymakers would bring inflation under control, making stocks and bonds better alternatives.

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Shilling observes that China participates in “unsavory” commercial practices that should be resisted. “They [China] have essentially not kept their promises, they have not opened up their technology, they are not open to our investments, they steal our technology, they require tech transfers for firms that want to operate in China, and so on,” he stated.

Shilling’s Key Contentions On The U.S.-China Tariff War

  • Despite the short-term discomfort, the United States will be better off in the long run.
  • China has broken its vow to open its markets.
  • China engages in rampant theft of U.S. technology
  • To change China’s behavior, economic pressure must be applied
  • China will give ground since the U.S. market is so vital to them

Source: Business Insider

The final issue, according to Shilling, is that the United States has considerable power to get long-overdue concessions from China. “They [Chinese President Xi and US President Trump] might go to war, resulting in a truly ugly, all-out trade war and a major worldwide recession. That is not something I foresee. I believe they will reach an agreement and China will unwillingly cede ground. They’ll import more American products, ease back on necessary technology transfers, and steal less of it. They’re not going to alter their minds completely, but I believe that under pressure, they’ll cave and we’ll win the trade war “He forecasts.

An economist with a similar perspective is Ed Yardeni, head of investment strategy consulting company Yardeni Research. “This trade escalation is likely to be more detrimental to China than to the United States. They need a settlement much more urgently than we do “Dr. Yardeni recently told CNBC. “I’m certain that our side is advocating for fairer trade with fewer trade barriers, not greater tariffs, which Trump is employing as a negotiation strategy,” he said in a MarketWatch essay in September 2018.

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Looking Ahead

While Shilling is optimistic about a constructive settlement to the US-China trade battle, there may be other clouds on the horizon. As noted in a recent piece, Lori Calvasina, director of U.S. equities strategy at RBC Capital Markets, and Vincent Deluard, head of global macro research and strategy at INTL FCStone, are among those experts warning that the market may be destined for a catastrophic crash.

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