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Trump’s Plan to Collapse China’s Economy Won’t Work
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Trump’s Plan to Collapse China’s Economy Won’t Work

The US-China trade wars began with the United States increasing tariffs and imposing various trade restrictions on China. This war was initiated during Donald Trump’s presidency in 2018. The claim Trump made when starting this war was that the US aimed to eliminate its economic dependence on foreign countries and support its domestic production.

However, over time, it became clear that the measures taken were insufficient to support production. Instead, the US’s actions mainly squeezed the Chinese economy, which had dethroned the US economically.

These developments reminded many of the technological advancements and the rise of Japan as a major manufacturing power in the 1980s.

JAPAN, THE FORMER MANUFACTURING GIANT

Between 1960 and 1995, Japan’s GDP experienced a tremendous leap. Japan’s GDP, which was $47 billion in 1960, reached $5.5 trillion by 1995. In 1987, Japan surpassed the US in per capita national income and became the global leader in this category. Japan maintained this position until the mid-1990s.

However, after 1995, this success story reversed, and Japan’s economy struggled to progress. Japan entered a long period of stagnation and contraction in its economy, which became a historical phase. Today, Japan’s GDP is at $4.2 trillion, a 24% contraction compared to 1995.

THE DEVELOPMENT OF THE JAPANESE MIRACLE

So, what happened to the “Japanese miracle”? Mainstream neoliberal economists attribute this to asset bubbles, expansionary policies, and chronic disinflation. However, the truth is far more complex.

After the 1970s, Japan became one of the most important manufacturing centers in the world. It held a strong position in electronics, machinery, and the automotive industry. Japan took the lead in semiconductor production, thanks to massive investments and incentives in R&D. By 1981, Japan produced 70% of the world’s semiconductors.

The US started to run a significant trade deficit with Japan through such production and innovation. By 2000, Japan had become the country with the largest dollar reserves in the world.

THE PLAZA AGREEMENT BLOW

In the 1980s, with the US losing its manufacturing and competitive edge, it took a significant step to reverse the situation – the Plaza Agreement.

The Plaza Agreement, signed on September 2, 1985, was a pact between France, West Germany, Japan, the US, and the UK to intervene in the currency markets, aiming to devalue the US dollar against the Japanese yen and the German mark.

The US dollar lost significant value after the agreement, while the Japanese yen appreciated. As part of the US’s strategy, several measures were taken to limit imports of Japanese goods, causing Japan to lose its competitive advantage in exporting cheap and high-quality products.

The yen initially overappreciated and depreciated, destabilizing Japan and leading to an economic crisis. Meanwhile, the US experienced a significant export increase, narrowing its trade deficit. Japan lost its competitive advantage in the US market and worldwide, delivering a massive blow to its economy.

CHINA’S MASSIVE LEAP

China entered the World Trade Organization in 2001, beginning its massive export surge. By 2015, imports from China accounted for 20% of US imports, reaching the top spot. After 2015, this share decreased to around 14% due to the tariffs imposed by the US.

Although the US’s pressure on China seemed effective for a while, China’s economy continued to grow in the global market despite the US’s ‘measures.’ Today, China’s manufacturing sector accounts for 2% of global GDP, while the US shares only around 1%.

In other words, China emerged from the trade wars initiated by the US by expanding its market share globally. Furthermore, China now has a significant lead over its closest competitor, Germany (Germany’s manufacturing sector accounts for only 0.3% of global GDP).

THE ‘CHINA MADE 2025’ PLAN

In 2015, China introduced its “Made in China 2025” initiative, setting various goals such as increasing high-tech production, achieving 70% localization of output (import substitution), developing innovation in manufacturing, making massive investments, and increasing competitiveness in global markets.

Despite the trade war launched by the US, China made progress in several high-tech export sectors. China’s growth in semiconductors (up by 15%), electric vehicles, 3D printers (up by 20%), and high-tech machinery (up by 14%) proves that the “Made in China 2025” goals have largely been successful.

These figures show that China has largely succeeded in achieving the goals of its 2025 plan despite all the barriers imposed by the US and the West. The US can no longer stop China’s technological advancement through political, economic, and trade obstacles. As they say in English, ‘that ship has sailed.’

CHINA’S DEFENSE INDUSTRY: THE US’S NIGHTMARE

Additionally, the trade war initiated by the US has severely impacted the export of high-tech products from the US to China. In other words, the US’s actions backfired. The trade restrictions led China to invest in and develop its military technologies, ending its dependency on some sectors.

China strengthened its domestic technological capabilities and advanced significantly in military technology. This scenario, which the US dreaded and possibly feared the most, has become a reality.

THE FOUNDATION OF SUCCESS: PLANNING, POLITICAL WILL, AND DETERMINATION

The main reasons China avoided falling into the same trap as Japan are its independent political and economic will, strategic planning, and determination. Despite enormous pressure from the West on currency and production, China remained firm and continued implementing its plans.

Another key advantage is China’s focused planning, which allowed for innovations in 10 years that would have otherwise taken 30-40 years. This also includes strong incentives and rigorous performance monitoring of public-private partnerships. Additionally, improving education for new sectors and strengthening human resources has played a vital role.

Finally, China’s Belt and Road Initiative and regional cooperation efforts have effectively neutralized the West’s encirclement strategy.

ENDING THE WESTERN RECIPES

In conclusion, the experiences of Japan and China show that the programs imposed by the West primarily benefit the West itself. If we want to solve economic problems, we need to focus on planning, high-tech production, import substitution, education, and developing regional cooperation, just as China has done. For a strong Turkey, we must end the ‘IMF-style programs’ and adopt a national, planned, and people-oriented mixed economy model.

Source: All data is sourced from Bloomberg Economist.

Source: This article was retrieved from the Aydınlık Newspaper’s website.

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