Trade relations between the United States and China
Tuesday, November 8, 2016 marked a new era in American politics. Donald Trump shocked the world and became the 45th president of the United States of America. The controversial businessman wowed the American public with his offbeat rhetoric and “in your face” campaign style. Throughout his campaign to become president, he proposed many agendas and ideas about what he thought it would take to “make America great again.” One of his big talking points during his campaign crusade was that he wanted to put America “first” again. Which means that he essentially wants to initiate plans that benefit the United States first and worry about the outside world later. This was highly controversial considering the United States has always gone out of its way to help other countries. However, Trump and his advisers believe that we, as a country, could be helping others and suffering the consequences.
This idea of putting the United States first goes hand in hand with the way it is dealing with international trade, especially with China. Donald Trump has often said that China is responsible for almost half of our trade deficit and believes that his government is manipulating its currency. To counter this, Donald Trump has proposed that we apply a 45 percent tariff on all Chinese imports. The Trump administration says this tariff would stem from years of China stealing jobs and rigging the trade system. Recent studies have put the total US job losses associated with the Chinese at 2 million. Most of these jobs are in the manufacturing industry.
Fearing a significant tariff on its imports, China has now threatened to retaliate if these tariffs are imposed. The Chinese government has conveyed the message to the US government urging against these “extravagant” (McDonald) tariffs. Chinese Commerce Minister Zhong Shan stated that the US and China are interdependent and bilateral trade relations would have an impact on the world economy. They fear that if things start to escalate, a trade war could be imminent (McDonald).
A trade war between the US and China would have a significant impact on both economies. First, if Trump imposes his own tariffs, China’s exports to the United States would fall by about 25 percent. This means that China’s annual economic growth would decline by as much as 1 percent. If China retaliates and imposes a tariff on the US, its economic growth could reach a quarter of a percentage point (Reuters). Not to mention the consumers who would ultimately suffer. If Chinese imports are taxed, companies would be forced to raise their prices, which would harm the consumer of these products. Really, this comes down to the US trying to reduce the trade deficit with China. There are several ideas out there on how to do this. One idea was that instead of imposing a tariff on all Chinese imports, there would simply be specific tariffs. These tariffs would apply to products that face strong competition from Chinese imports, such as steel, machinery and auto parts. Another way to reduce the deficit would be to increase services exports to China.
Like any problem, the best way to solve one is through discussion. These tensions between the US and Chinese governments are very real and very serious. The world’s two largest economies are on the brink of a showdown that could set both economies back. Sun Jiwen, a spokesperson for China’s Ministry of Commerce, believes these trade tensions will be resolved through much-needed dialogue. However, it could take little more than an open invitation for Trump to join the discussion table. Trump is playing hardball. He feels that the United States has been disadvantaged since China joined the WTO (World Trade Organization) in 2001 (Reuters). China has said it is willing to sit down with the Trump administration to work out a plan that could benefit both nations. Chinese President Xi Jinping has defended free trade on numerous occasions and has stated that “no one will win” in an international trade war (Reuters).
These are significant times in our country. The United States has always been at the forefront of world leadership and it is interesting to see with this new administration how these issues will play out. Every decision has a consequence, good or bad. I hope that the Trump administration weighs all options before making an irrational decision. The fate of the US economy depends on it.
Reuters http://fortune.com/2017/03/20/donald-trump-china-trade-war-2/
McDonald, Joe http://business.financialpost.com/news/economy/china-is-preparing-to-retaliate-against-donald-trumps-tough-trade-stance-warns-american-chamber-of-commerce