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When it comes to the game of playing chicken, it all comes down to who blinks first - Who swerves out of the way. And in the case of the game being played between the US and China, it is the US that has backed down, by exempting a whole range of consumer electronics and components, because of the skyrocketing prices the tariffs have applied to buyers in the US. I guess American voters are finally working out how tariffs work, and where those billions are going to come from - Americans.

> Tariffs are a tax on the buyer.

![image.png](https://files.peakd.com/file/peakd-hive/tarazkp/23wqXkmt7ap6Laq7c7o5Pr6euVDWoZW5vspfSJoTBzhBvka4yQYDybUQuQLMAFmkkXCaZ.png)

If Beijing really wanted to exert some pressure now, they should increase the prices of everything sold into the US that they have exempted by a significant percentage, to actually make some money from the tariffs for the Chinese companies. And, the Rest of the World could be doing the same, where instead of the tariffs making it unprofitable to sell into the US, increase the prices on everything the US is unable to produce for itself adequately, to offset the loss of sales from whatever tariffs they have been subjected to. 

> But reduce prices a little for all other countries.

Instead of the US continuing to use the world to maintain its dominance as the world's largest single economy, the Rest of the World could be using the US to finance the development of a stronger global marketplace by increasing the buying power of consumers globally. A single market is very attractive for producers and sellers, but as we can see, it comes with risks, so distributing the marketplace and reducing reliance on a single customer,  mitigates the risk of an abusive conglomerate. 

Economies of scale means that there is the ability to reduce prices at volume, but the main way to do so is that it is possible to both buy in bulk at cheaper prices, and put pressure on suppliers to reduce prices. This means that while more profits can be made at the end of the supply chain, all the suppliers get systematically crushed in the earlier stages, with continually more pressure being applied to them to drop prices further, and further, as the buyers up the chain want more profits. And often, the early sellers in the supply chain are coming from the poorer countries - places where many people live in poverty, despite working very long hours in terrible conditions. 

> So the largest economy can enjoy cheap products and make enormous profits.

While Trump is selling the narrative that the rest of the world is getting rich off of the US, that is not actually the case. If it was the case, the massive investment companies like BlackRock, Vanguard, Fidelity and State Street Global would be losing money - not making unprecedented gains.

![image.png](https://files.peakd.com/file/peakd-hive/tarazkp/Enyo7NKYVkxRbH371AC3x1imo6tG3jyUqSFTroNkHSUVEcc19C7UZUDaon5nw4qzEaV.png)

> 15 of the top 20 are US investment companies. 
There is one French, two German, a Swiss and one from the UK for the other 5.
[](https://en.wikipedia.org/wiki/List_of_asset_management_firms)

The current US administration led by Trump is looking to break the assumptions of the global economy, but it is also expecting that the countries it is looking to harm will accept their fate and try to maintain global stability, effectively giving increasing concessions to the US. However, it is possible for the Rest of World to play a convention-breaking game too and disrupt the global order by controlling prices it sells into the US. While the US will take a long time before it is able to build industry to replace global suppliers, the rest of the world doesn't need anything vital that only comes from the US. 

> Twinkies? Pop-tarts? 

The US has a brilliant service economy, but it is enabled by a global supply chain of materials and products from the rest of the world. If the cost of that supply increases, the consumer spending decreases, and the corporations that are in the service business, are unable to survive, because they are very, very top heavy in their structure. They *need to sell* in order to make money, but what they sell they don't produce locally or likely own at all. 

The global investors like BlackRock and Vanguard are invested into many of the global business so that they can skim profits from each stage and help crush down supply costs, but they too rely on the end consumer purchasing. As does Meta and Google who rely almost entirely on ad revenue. And then, Amazon which is only possible because of the massive amount of its content coming from China and other similar countries to keep them competitive and cheaper than "bricks and mortar" stores.

Remember, that globalisation is what enabled these US companies and many more US companies to become extremely wealthy and the most valuable on earth. If the supply chain costs increase, they are unable to operate anywhere near as effectively, and their profits will suffer incredibly. Not just the perception of the brand affects the price, there is a reality in the product offering too. 

If the Rest of the World chooses to take advantage of the supply chain streams going into the US, they are able to enact a massive cost upon the country at minimal expense, because they can offset it through increased trade elsewhere. And for a time, this would be enormous while the US ramps up its production. But, even once the production is up and running, the costs will be higher for the consumer and they will have less export opportunity as the RoW has adjusted to a new economic structure. The US will end up with more production, but only able to sell locally, but locals can't afford to consume like earlier, because they are no longer benefitting from the supply chain scales of economy they enjoyed prior to this Trump-led trade war. 

> The US may have lost control of the economy.

As the largest consumer market, the US was able to dictate a lot of terms and influence a huge amount of the global trade, which also gave them a lot of say in world affairs. But, with a little coordination, the rest of the world can weaken the US economy and its ability to consume, reducing its share of trade from a majority shareholder, to a large minority. And, the only response that the US can really have is to do what it has been doing to get where it is in the first place, which is to increase its debt to stimulate more consumption. But, this isn't good for the US either, because that is going to give another reason to minimize the US dollar as the main reserve currency, and its place as the medium of exchange.

> This might backfire spectacularly on the US.

And if you are like me and looking for a healthier, more distributed economy - 

*That is a good thing.* 

Just don't blink.


Taraz
[ Gen1: Hive ]


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