Trump Is Already Losing The Trade War
I spend hours every day searching the internet or writing about energy and climate change. As a retired computer engineer, I am very aware of my computer. I recently realized it has a story to tell about Donald Trump’s trade war on China.
The core of the computer is a “system on a chip.” It includes quad-core 64-bit processor, a graphics unit, a floating point unit, and a gigabyte of RAM. It runs at 1.2 gigahertz. The computer has four USB ports, an Ethernet port, and an HDMI port. The operating system is a type of Debian Linux which includes a full office suite comparable to Microsoft Office.
Impressive, right?
Actually, no. This is a pretty basic machine. It was quite literally designed for a ten-year-old child to operate. It is very small, about the size of a pack of cards. The computer cost $35. Its 32-gigabyte SD card cost an additional $18, but that price included all the software I might want for word processing, web browsing, and nearly anything else I do. I spent $6 on a power supply and $6 on a case. It attaches to a standard monitor, keyboard, mouse, and printer.
As a new computer, with its software and other necessities, it set me back $65. But that is not why it is my computer of choice. I use it because I like it.
It is a Raspberry Pi, which was the third most popular computer in the world last year, in terms of the number sold. My $35 machine was the most powerful Raspberry Pi model, when I got it. The new top of the line version is a bit of an improvement, but also costs $35. The least costly Raspberry Pi is a computer about the size of an empty matchbook, opened up. It also runs all the software I need, but it is a little slow for web-surfing. It costs $5, though you can get a version with Bluetooth and WiFi built in for $10.
My computer was made in a factory in Wales. The company that makes the CPU is in England. Much of what goes into the computer is by Japanese or Chinese companies. The software on it is published for free. It is a globally available product that does not need America for innovation, design, manufacture, or even as a market.
And therein is a problem Trump can only make worse, if he persists with his methods.
Leading up to Donald Trump’s declaration of a trade war on China, he insulted every country on Earth by withdrawing from the Paris Climate Agreement. That resulted in a power vacuum, just at the same time China had already been trying hard for over a year to befriend almost every country. China did not even have to switch gears to move to fill that void. I dealt with that issue in the CleanTechnica article, “Don’t Bet On A Decline In Chinese Solar PV Production.”
Trump is trying to protect American producers that are not competitive and encourage those that are obsolete, while failing to foster our potential leaders. This is not going to make America anything but backward and old-fashioned.
The gravity of this situation can be seen best, possibly, in terms of sales of electric buses (e-buses). These electric vehicles cost about 60% more than comparable diesel buses, but have payoff periods that can be as short as six years because they cost much less to operate and maintain. This makes them rather attractive for transportation companies.
The folks at Proterra, possibly the largest American e-bus maker, told me that they have sold 545 so far, all in the United States. There are 65,000 commercial buses in the US, and these are usually replaced when they are about fifteen years old. Proterra sees bus companies moving over time to 100% e-bus fleets.
BYD, the largest Chinese manufacturer, also has a small e-bus manufacturing plant in the US. It had delivered about 130 e-buses in this country by last November, and it expects that number to grow to 300 by the middle of 2018.
Shockingly, the market for the rest of the world is in an entirely different league and not at all comparable to that in the US. China produced over 300,000 electric buses in just three years, according to the article, “China 100% Electric Bus Sales ‘Just’ 89,546 In 2017.”
Electric buses cost roughly $750,000 each. That means that the value of Chinese production, at about 100,000 per year, is about $75 billion in annual sales. This is clearly an important market for China. It would be important for the US, but this country is not even trying to compete in it.
When BYD wanted to set up another plant in North America, it decided to build it in Canada, because of a lack of US interest. CleanTechnica covered this in “BYD Opening Electric Truck Factory In Canada, Cites Friendlier Environment For EVs Than US.”
China is not dependent on the US for this production. And in the case of e-buses, its products are not being sold in the US in any quantity worth considering. Shutting off US markets to China will be almost entirely irrelevant to the Chinese.
The same is true for other products. Chinese washing machines, for instance, are being sold in the US. But if the US blocked them altogether, they still could be sold in other countries. As PV panels, wind turbines, and batteries spread through the world, largely built with Chinese products and financed with Chinese money, markets will grow for other Chinese goods, including appliances.
We might contrast this with the official American attitude toward fossil fuels. The Trump administration has been supportive of fossil fuels as it tries to “make America great.” But it supports a market that might not have much of a future.
An interesting article, “You should be scared if you own natural gas stocks,” recently appeared at CNBC. It provides some insight into how the market feels about companies in that industry. The article warns investors to move away from natural gas. One reason it gives is renewable power, and another is a general market glut.
There are other reasons to divest of gas stock that article did not go into, however. Energy generation from natural gas fell in the US last year for the first time in many years. In fact, it fell by quite a lot, about 7.6%, according to EIA data.
For other parts of the gas market, the situation may look rosy, but that might be deceptive. The gas industry seems to have hopes based on two things. One is fracking, which allows it to extract large amounts of gas quickly. The other is a growing gas export trade.
The problem with this is that a lot of countries can do fracking and compete with the US. All they have to do is decide to do it. Russia, China, Australia, Canada, Mexico, and even the UK come to mind.
US exports can go to nearby countries that can compete with it (Canada and Mexico), or it can be liquefied for long distance shipment. By contrast, gas from those potentially competing countries can usually be simply piped to their customers. In other words, it will be cheaper for customers in many countries to ignore America than to deal with it. And if they retaliate by putting tariffs on gas, that will make things more difficult for the gas and oil companies.
Donald Trump has failed to understand one essential point about a trade war. To win it, you need friends. In that ignorance, he is antagonizing customers at the very time his competition is courting them.
But he has also ignored technology. Trump has been trying to make America great again by promoting the use of obsolete and obsolescent technologies, as he attempts to resurrect coal, promote oil and gas, and to retard our adoption of renewable power. He has started a trade war while his forces were already in a somewhat disorderly retreat from a position of potential market leadership. This may provide short-term benefits for Koch Industries, ExxonMobil, ConocoPhillips, and Chevron. But it cannot make America great.
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