We had an inquiry last Monday on an expensive CNC turning center from a machinery broker based in Chicago but representing a Chinese firm.
Thinking of a potential profit if we sold it, I asked Noah to quote the machine. His response was, “Dad, we can’t sell it to them. We are at war.”
I immediately knew he was correct. The parts made on this rare machine could be used in a missile or a drone that would threaten the United States or an ally like Taiwan.
Our next president, Donald Trump, has threatened a trade war with China. We are already clearly in a non-shooting battle with the country, led by the old communist disciple of Mao Tse Tsung, who sees the US as its primary enemy. What makes it more dangerous is that Chairman Xi’s country is in an economic tailspin that threatens to become a depression.
Their real estate failure, with empty cities of vacant apartments, dwarfs the American debacle of 2008. If population growth in America is stagnant, China’s is a disaster.
China’s takeover of Hong Kong has been an economic loser. Not long ago it was a thriving capitalist community with free elections. Today it is floundering.
Yet Chairman Xi still views the United States as a failing state which China will eventually defeat economically and with physical war if necessary.
China’s remaining strength lies in heavy industry and manufacturing. In order to support it he will use a price war, spying, and theft.
Our next President is threatening an expansion of the trade war that he began in his first term. What will this mean for the machining industry in America and other Western countries?
My view is that we will see a short-term upturn as companies continue their move away from China to protect their sources. This will provide a boost to the surviving machining companies here who are able to find people with the necessary skills. Immigration of able and willing workers may be the best approach to do that if the politics can be broached in the best way.
In the longer run, I fear that a China suffering even more under incompetent leadership could become war-like and more aggressive, cutting prices to undermine the US and a politically unstable Western Europe.
As the American lead in high tech leaves China further behind, China’s political leadership will become even more desperate to conquer it by any means. This could make a war with Taiwan look more necessary as the island’s lead in artificial intelligence chips is viewed as crucial for world power.
What could scare them, however, is observing how Israel and Ukraine have defeated or fought off countries seemingly more powerful.
The future is quite unclear, but it always is. I am not pessimistic because the creativity of America always seems to find a way. But I expect it to be a bumpy few years ahead.
Question: How do you think an increase in tariffs will affect your business?