An important thread because it underscores the fundamental issues people like me have with ideas like this. The TYPE of employment countries have is crucial, this isn't just about demand. https://twitter.com/michaelxpettis/status/1308014881426362368

We know empirically that the share of tradable employment is linked to future economic prosperity. Indeed, the whole point of the China (and South Korea etc) development story is that the state mobilized capex to industrialize.

This isn't to say boosting demand via net exports hasn't been an important policy tool for these nations, particularly post-2008, but reducing the trade war to the current account balance is as many have argued a mistake.

This is especially the case for the US (and the UK etc), which can make up any gap in demand via the government deficit (so what if it pushes up the CAD? We've already established it can be sustained). I honestly find the "exorbitant burden" arguments baffling.

While surely the West has had a shortage of demand employment numbers weren't as bad recently. What fuels trade anger is the decline of specific regions which used to have high-productivity jobs. Sometimes the decline wasn't THAT large as a % but it was regionally devastating.

Not to mention that the geopolitical consequences of developing a domestic aerospace, telecom or tech powerhouse simply CAN'T be divorced from the broader trade war analysis no matter how much one insists on it. Haven't we seen this by now?

China clearly understands that very well. IMO it is far more feasible that we'll see China giving up on "net trade" policy tools than giving up on the likes of China 2025, because that's what it's been ALL ABOUT.

Too much focus on trade balances misses that Asia has been able to grow via external demand because the capex investment and industrial policies were there first. THAT is the development miracle.

The crucial imbalance isn't net trade, it's that the success of state-led development in Asia is upsetting the US-centric hierarchy of the international division of labor, and as such also eventually its military hegemony. https://media.defense.gov/2020/Sep/01/2002488689/-1/-1/1/2020-DOD-CHINA-MILITARY-POWER-REPORT-FINAL.PDF

This is what military and commercial empires have always been about. It isn't just a matter of finding demand abroad because you produce more than you can internally consume, it's about who does what and who keeps the guns because of what they do.

Too much "macro thinking" can sometimes fudge this fundamental issue. But if you are from a periphery country where you always have to migrate to get good jobs in leading industries (yay), you probably get this.

So no, I'm afraid the Chinese and the American (or German and Spanish) worker don't both have the same incentives for demand to simply be rebalanced. Their economic incentives are and have been radically distinct. And this doesn't have a quick fix.