They could demand to be paid in yuan, but what would China want yuan for anyway? The yuan is a sovereign currency, like the dollar. They can print as much as they want. If they leave it in the Fed, it earns interest.
Be careful not to give the impression that it is the US Treasury making payments in any currency other than US dollars. It is done by "customers" of Chinese companies and the conversion of dollars to other currencies must be shown on their tax statements so the dollar equation can be factored in.
You are 100% correct in that China has no more use for yuan than the US government has for dollars. They can both create an infinite number of their respective sovereign currencies on demand. China has dollars because it does business here in dollars, just as it does with most other countries it deals with. Bonds are purchased in dollar denominated reserves only.
The only thing we owe China is a return of those reserves and the interest earned when the bonds mature. They have no more power over our economy than any other investor holding bonds.
Reducing the trade deficit, on the other hand, is a necessary goal. The deficit represents American jobs being done in China.
Other than some high tech, I'm not sure we really want those jobs back, just as Americans don't want to pick crops in American fields. Also, we get "real" resources and labor in the form of the goods we buy from them, minus the pollution and resource depletion, with currency we pull out of our backsides.
Our mistake in dealing with China wasn't in trade, but domestically not allowing American workers to claim a stake in that decision and realizing some monetary gain other than from cheaper goods available. The transition from the largest net exporter to the largest net importer was far too rapid for our economy to adjust to in terms of jobs and wage protections.
I don’t care about buying underwear from China, but high-tech items such as solar panels should be made here.
I agree completely. For one, it is impossible to pick a major in college that is guaranteed to be useful down the road four years. Add to that the fact that you are learning that trade/field from someone who is guaranteed to be, at least, four years behind the curve and you effectively destroyed higher education.
As the world converts all of its processes to digital and battery storage it will be critical to have the ability to supply the necessary chips and storage cells for our own use without dependence on anyone else. Look at what just a slowdown of shipments have done to our manufacturing, and then think about what it would be like if those shipments stopped altogether.
The government should apply the same reasoning and use of our sovereign fiat currency to subsidize domestic manufacturing of critical materials and parts, like it does to farming. We do have a considerable lock on manufacturing the silicon chip and board blanks because of the high quality of silicon we can access here, but that isn't enough to compensate for having virtually no chip manufacturing here.
The tariffs have raised $89 billion or so with over $60 billion of the take going to pay farmers for damages to their markets. So it’s a wash. Except that we consumers now have to pay higher prices and Trump’s tariffs cost 180,000 jobs.
Trump was the best at sizing up a rube. He knew that the average America would believe that it was the "importer' that paid the tariff and would have no clue that might connect tariffs with higher prices or lost jobs.
He might even have been ignorant of the facts himself, but I think it was just another way to rile up his base to keep their perpetual anger and frustration at a simmer. Like all wannabe fascists, he knows how to misdirect that anger to some "other" to avoid it ever coming to land on capitalism.
