By Mark Kolakowski Updated May 23, 2019
"When you've got plenty of supply in the world, and I think you do...it's the buyer that has the upper hand not the seller. The buyer has the ultimate power and who's the buyer? U.S. is the buyer, China is the seller..If we weren't buying all those consumer goods from China...where would China sell them? They have no other place to sell them, and in the meanwhile, China's growth is slowing," Shilling added.
His comments come as other observers see growing problems for the economy and the markets that are likely to be worsened by protracted trade conflict, as summarized in the table below.
Significance for InvestorsShilling is well-known as an economic and financial commentator with a contrarian bent, as a columnist for Forbes (since 1983) and Bloomberg, a frequent interviewee on CNBC and Bloomberg TV, and as the author of, or contributor to, several books. Among his most notable forecasts: in the late 1970s, contrary to a widespread belief that the high inflation would persist for many years, making tangible assets the best investment options, Shilling anticipated that policymakers would bring inflation under control, making stocks and bonds better alternatives.
Shilling notes that China engages in "underhanded" trade practices that should be challenged. "They [China] basically have not fulfilled their promises, they have not opened up their technology, they're not opening up to our investments, they steal our technology, they demand tech transfers for companies that want to operate in China and so on," he said.
Shilling's Key Contentions On The U.S.-China Tariff War
- Despite short-term pain, the U.S. will be better off in the long run
- China has reneged on promises to open its markets
- China engages in rampant theft of U.S. technology
- To change China's behavior, economic pressure must be applied
- China will give ground since the U.S. market is so vital to them
Ed Yardeni, president of investment strategy consulting firm Yardeni Research, is an economist with a similar outlook. "This trade escalation is probably going to be more of a negative for China than for it is for the United States. They desperately need a deal much more than we do," Dr. Yardeni told CNBC recently. "I'm convinced that our side is pushing for fairer trade with fewer trade barriers, not higher tariffs, which Trump is using as a tactical negotiating tool," he wrote in column for MarketWatch in Sept. 2018.