The US attitude on the trade relationship with China

The US presidential election is coming and there have been over a dozen of Democratic politicians running for the next president. They rarely attack each other and they mostly attack the current US president, Donald Trump. Many of these candidates attack Trump from the moral aspect and criticise him about not punishing the Russians for its meddling in the previous presidential election and instead allowing the Russians to keep influencing the US elections. In addition, Trump is also criticised about his policies making the rich richer (his tax cuts) and making the poor more difficult (removing the Obama care). His attitudes towards foreigners and minority groups are also criticised by the media and the opposition. However, we are missing one important thing in Trump's presidency, which is his foreign policy with China.

Trump's foreign policies do often face criticism from the Democrats, especially some 'hostile' attitudes towards its allies and too 'friendly' attitudes towards Russia and North Korea. It seems that Trump quite enjoys his time with the Chinese president, Xi, but this does not prevent him from launching the trade war with China. The trade war with China faces some level of criticism from the media, but it has not been a major issue in the ongoing presidential election campaign and debate. There can be several reasons to explain this. First, the trade war with China is difficult to say what exact outcome will be, it is hard to conclude it is definitely bad for the US. Secondly, the trade war may make much more sense than many of Trump's other policies, it is much easier to attack his other policies. Thirdly, some politicians from the Democratic Party may agree with Trump and they also believe a more powerful China can threaten the US and impact the global interests of the US.

Overall, the one which is causing much uncertainty may not be as likely as many people expect to be changed by new leadership if a new president is elected next year.

The trade negotiation

The trade negotiation has been clouded by the US president Trump's tweets and the rising uncertainty about the negotiation has dragged the global stock market down. Trump personally wants to increase the tariffs on Chinese imports and reduce the US trade deficits by lowering its imports; on the other hand, the Chinese government knows the US demand is to lower its trade deficits with China, and seeks a different way that can reduce the costs for China but is able to achieve the same goal, China wants to purchase more US goods and services, especially many agricultural products including soya beans and some high tech equipment which the US does not want to include as part of the trade deal.

The US way will have a greater negative impact on the Chinese economy, as the industries which rely on exporting to the US will be deeply affected. However, if China and the US choose to narrow the trade gap by China purchasing more US goods, the Chinese companies will continue to export their goods and the US economy will be benefited by more exports to China at least in the short term. Therefore, if China withdraws its previous agreement about purchasing more US agricultural products because the US wants to increase the tariffs, then the US agricultural industry will be affected and at least miss a huge opportunity.

Of course, the US idea has its own reason. Increasing the tariffs can increase the competitiveness of its industries in general domestically, instead of only several specific industries.

OMG, Tweets

It is another bad day for the global stock market due to Trump’s tweet habit. Trump’s tweets have been causing huge uncertainty towards the market and they could lead to market rise and fall. Why does the market respond to Trump’s tweets? First, Trump is the president of the United States, the largest economy on the earth. Secondly, as the president, Trump’s words can be used as a guidance of the US’s domestic and foreign policies. Thirdly, Trump’s tweets are generally believed to be spoken out of his heart.

However, what Trump has tweeted about has not always been true. Some tweets are his wishes, but due to the constraints and the reality, they have not come true. Moreover, some of his tweets are bluffing about the situation and his power in order to gain some advantages. Such tweets are not helpful to the reality if all parties are fully informed; however, the market is not fully informed about the situation, for example, the market will never know what exactly is happening in the negotiation room of the trade talk between the US and China, which is definitely known by the two governments. Therefore, the two governments know what will happen to the trade relationship between the two countries, but the market has to rely on the public information released by the governments. At the moment, the Chinese government has been remaining low profile about this important trade talk and there has not been much official information released by the US government. Under such circumstance, the market may have to rely on the information released via unofficial channels. One of the unofficial channels is Trump’s twitter account. As the US president, his information should be credible and accurate; therefore, the market takes the information coming from the US president as the real information.

Because there is a chance that the US president is not necessarily giving the truth, the market is acting volatilly when Trump tweets. Too much volatility is not good for investors, under such circumstance, I think nothing is better than Trump’s tweets.

The UK local election

The local election in the UK has ended and the result I think largely reflects the population’s feelings about the government and the Parliament’s Brexit progress. Brexit has not made any real progress, and the population has a reason to blame the majority party, which is the Conservative party. The Conservative party suffered the worst local election in the last 20 years that the party lost 37 councils and more than 1000 seats. Usually the loss of the party in power means the win of the biggest opposition party; however, ironically the Labour Party also lost 86 seats in the local election. The defeat of the two parties I think was caused by the population’s disappointment about the current Brexit progress. The Conservative party does not have clear Brexit plan or strategy that though the Prime Minister has proposed a Brexit deal, the deal has faced a wide opposition within the Conservative party. In addition, it seems that the Labour Party does not want to cooperate with the Prime Minister who was looking for the support from the Labour Party. In addition, neither party is willing to form a cross-party cooperation to make any real progress on Brexit. Furthermore, given the current situation, the supporters for remaining in the EU are much angrier and the support for the Conservative party in the area where the majority supports remaining in the EU fell by a third based on the election rate.

On the other hand, the Liberal Democrats are the biggest winner of the local election. However, based on the current electoral system, the Liberal Democrats may further expand its political power in the next general election, but the expansion could be relatively limited.

Labour Market in the New Era

Labour market largely determines one economy's performance and structure. When wage level is relatively low, the economy is likely to focus on manufacturing; when wage level is high, the economy is highly likely to focus on high value added industries. Labour market is determined by other factors in the economy as well as the society. Usually labour market with a high general wage level is in a society where the population receives high level of education and is productive.

At the moment, labour market is facing another "revolution", which is led by the development of AI and robots. Though I said that AI and robots would not cause an immediate impact, they will inevitably influence labour market as well as economy and cause a structural change. The development will further advance the power of capitalists. There are several factors of production - land, capital, labour and entreprise. What factor of production does the ordinary people control? Most ordinary people have labour as their main contribution to the economy's production, while at least two out of the other three factors are largely controlled by capitalists, who have the wealth to own land and capital. The development of AI and robots can improve the returns of capital investment in AI and robots, making it more attractive to replace human labours by AI and robots. Of course, people with talent and entrepreneurship are and will be always highly demanded in the labour market; however, some talents might be less significant or importance under the threat from AI and robots.

The wage level in the labour market can be pushed down by AI and robots, even in some technical industries. When the use of AI and robots become more widespread, the demand for AI and robots experts will increase and the wage in this field can increase; however, the demand for other field experts, especially where the jobs can be done by AI and robots, can decrease, the wage level will decrease. On the other hand, capitalists are the biggest winner, since they can enjoy from improved productivity and lower costs of production, they will become wealthier and wealthier and the wealth gap between the wealthiest and the ordinary will become larger and larger.

How biased is a letting agent?

I am currently looking for renting an apartment through a letting agent. I am definitely this letting agent's client; however, my landlord is this agent's client if I find and rent an apartment through this agent. Then this agent needs to take care of both my landlord's benefits and my benefits, often my benefits and my landlord's benefits do contradict. When my benefits contradict with my landlord's benefits, then how does the agent balance its clients' benefits? Is the agent likely to be biased towards any party?

My belief is the agent is very likely to be biased towards the landlord. Landlord is much more likely to stay with the same letting agent than someone who is renting a property because people who rent are likely to move around and different places have different letting agents while properties do not change locations. Therefore, it is not surprising that letting agents are biased towards their long term clients. However, letting agents cannot take no care of tenants' benefits at all, because this will make letting agents difficult to let properties to people and make the tenant periods shorter than they should be. Maybe agents can use information asymmetry to make some more benefits for themselves and their landlords; however, this is not consistent, especially when the Internet has help to improve information perfection.

Overall, letting agents are likely to be biased towards their landlord clients, but they still have to take some care of tenants' benefits.

How can robots threaten human labours?

The development in robots and AI has been making some good progress and there is always a question surrounding the development in this field, which is how much threat it causes to human labours. There are some obvious advantage and disadvantages about using robots to replace human labours. 

First, using robots can lower firms' costs of labours, but using robots has a cost of maintenance. Secondly, using robots can increase productivity and robots do not need any holiday or break; on the other hand, it does not mean robots cannot make mistake, robots can make mistakes due to technical issues, human errors and many other factors, once robots fail, it is very likely to have a systematic failure, which can be much more damaging to the firm. Thirdly, using AI or robots reduce the demand for labours, but the requirements for the skills of workers employed become much higher, and overall it may not reduce the overall cost of labours.

Therefore, especially at the starting period, robots should not affect human labours too much, since the cost reduction by using robots is not significant and attractive enough; moreover, even when the technology is more mature, the demand for highly skilled labours can increase and be paid better, because firms cannot bear systematic failure caused by "bad" designs of robots.