New York (Bloomberg) – US President Donald Trump has publicly tweeted that “trade wars are good and easy to win” when he began imposing tariffs on $ 360 billion imported from China in 2018. He is wrong on both counts.
Before the coronary virus infected millions of Americans and caused the severe economic downturn that followed the Great Depression, China used the measure he used to justify Trump’s tariff salvos. After China took control of the virus, it expanded its trade surplus with the United States, despite a surge in demand for medical equipment and home appliances.
Under Trump, trade tensions between the world’s two largest economic powers did not begin, and he expanded his fight with unprecedented tariffs and sanctions on technology companies. According to the scoreboard below, the tough approach did not go as he had hoped. But he leaves his successor, Joe Biden, with a plan of what worked and what did not.
“China is huge for the world economy and it’s not important that you think you can cut it like a paper doll,” said Mary Lovely, a professor of economics at Syracuse University. “The Trump administration had a wake-up call.”
The U.S. trade deficit grew
In his 2016 election year, Trump promised to quickly “reverse” the U.S. commodity deficit with China, and ignored the mainstream economics ists that underestimated the importance of bilateral deficits. However, the deficit with China has widened since then, to $ 287 billion ($ 381 billion) in the 11 months to November, according to Chinese data.
The deficit narrowed year-on-year in 2019 as U.S. companies shifted to importing from countries such as Vietnam. But that was higher than the $ 254 billion gap in 2016. Imports of American products were reduced and these recovered only in the last few months of 2020.
As part of the first round of trade agreements signed a year ago, Beijing has promised to import US $ 172 billion worth of US goods into specific segments by 2020, but by the end of November it had bought only 51 per cent of the target. The failure was due to falling energy prices in the midst of the epidemic and problems with Boeing aircraft.
The re-emergence of the epidemic shows how persistent shortages exist in companies that rely on China’s massive production capacity. China is the only country that can produce large enough quantities to meet the growing demand for home appliances, such as computers and medical equipment.
China’s export machine is operational
Mr Trump has repeatedly said that China’s entry into the WTO in 2001 caused its economy to fly like a “rocket ship”. Mr. Trump’s trade war with China coincided with another expansion of Chinese exports. Every year since Mr. Trump came to power, total shipping from China has grown, including a drop in exports to the U.S. in 2019 after a contraction in 2015 and 2016.
In 2019, a group of 10 Southeast Asian countries replaced the United States as China’s second-largest trading partner. The shift to Asia will continue as Southeast Asian economies are forecast to grow faster than developed countries in the coming decade. The Comprehensive Regional Economic Partnership Agreement signed late last year will further strengthen those trade ties, with 15 regional economies gradually dropping tariffs on each other’s goods.
U.S. companies stay in China
Mr Trump said tariffs could encourage U.S. manufacturers to take products back home, and in a 2019 tweet he ordered them to “immediately begin looking for an alternative to China.” But there is no evidence of such a shift.
According to Rhodium Group data, US direct investment in China has increased slightly from US $ 12.9 billion in 2016 to US $ 13.3 billion in 2019.
More than three-quarters of U.S. manufacturers in and around Shanghai surveyed in September said they did not intend to take the product out of China. U.S. companies constantly cite the rapid growth of the Chinese consumer market and the expansion with its strong production capabilities. “No matter how high the Trump administration charges, it will be very difficult to prevent US companies from investing,” said Kir Gibbs, chairman of the American Chamber of Commerce in Shanghai.
Economic losses on both sides
Trump said tariffs have boosted the U.S. economy, making China’s worst 50 years in 2019. However, the direct economic impact on the value of exports was small relative to the size of the two economies. They are very small compared to the gross domestic product (GDP).
According to Yang Zhao, an economist at the University of Minnesota, China will grow 6 percent or more in both 2018 and 2019, accounting for about 0.3 percent of GDP. According to her estimates, the trade war cost 0.08 percent of GDP over the same period. Clearly the winner was Vietnam, where companies relocated, raising tariff GDP by 0.2 percent.
U.S. Consumer Bill based
Mr Trump has repeatedly said China pays tariffs. After the imposition of tariffs, Chinese exporters were generally surprised by the economics ists that crushed the numbers on not reducing prices to keep their goods competitive. This means that most U.S. tariffs are paid by their own companies and consumers.
According to the National Economic Research Bureau, US consumers lost about $ 16.8 billion annually in 2018 as a result of these tariffs.
Another target: Tariffs on imports from China tended to reduce U.S. exports. This is because globalized supply chains are shared between manufacturing countries. The United States increased the cost of its own goods by imposing tariffs on Chinese component imports.
Researchers from the National Economic Research Bureau, the U.S. Census Bureau and the Federal Reserve analyze secret company data that exports that account for 80 percent of U.S. exports have to pay higher prices for Chinese imports.
The rust belt remained in rust
Mr Trump strongly campaigned on promises to revive the Rust Belt in 2016 by taking over China and bringing jobs back home. It did not happen.
Growth in manufacturing jobs in the U.S. flattened in 2019, partly due to a decline in exports. Research by Michael Michael Waugh, a New York University Stern School of Business economist, suggests that the trade war trajectory has not changed significantly, even in homes such as steel, which is clearly protected by Trump’s tariffs. U.S. products.
“Those things are going to go to the beach naturally. Security will probably delay it,” Mr Waugh said. “There is no evidence that tariff workers were paid benefits.”
The epidemic disruption to the world economy by 2020 makes it difficult to assess the impact of tariffs on jobs and investment.
China changed its pace
The Trump administration has said that tariffs have given the Chinese more impetus and will force them to make reforms that benefit U.S. companies. “I want to impose tariffs properly,” he said. Because they bring you to do whatever it takes to bring unfair competitors from foreign countries to you, ”Mr. Trump said.
The biggest achievement announced by the administration as part of the trade deal was the promise made by Beijing to enhance intellectual property (IP) security. However, it is most likely for China’s needs.
Mark Cohen, a specialist in Chinese law at Fordham University in New York, said Beijing had made “major legislative changes” over the past two years to strengthen IP security, and that his own motivation to innovate could be a more important factor. Than U.S. pressure. The agreement does not push China’s structural reforms to make its system more systematically compatible with most systems in the world.
Chinese companies paid a record $ 7.9 billion to the U.S. in 2019, up from $ 6.6 billion in 2016, and its courts imposed a record number of fines for IP infringement loans involving U.S. companies. According to World Bank data, US payments are part of a general trend, with the pace of growth slowing down its IP payments to the rest of the world.
Washington has failed to make a significant commitment to reforming Chinese state-owned enterprises, citing tariff justification.
Trade war for technological war
Biden, now president-elect, will decide whether to continue the trade war. In a recent interview, he said he would not immediately remove the fees and would review the first phase deal instead.
The escalating conflict over technology is of greater concern to China compared to tariffs. Sanctions and export restrictions imposed by Washington have threatened the viability of leading technology companies such as Huawei Technologies and Microchip Manufacturer Semiconductor Products International. It is a threat to Beijing’s plans for economic growth.
“If the United States continues to increase its technological barriers, China’s modernization will certainly affect the upper echelons of the global industrial chain,” two researchers at the official Communist Party School in Jiangsu Province wrote in an article.
The impact of U.S. action so far has been to accelerate Beijing’s push for technological self-sufficiency. The issue, which was signaled by a statement last month that increasing “strategic scientific and technological strength” is the most important economic task, has accelerated the Communist Party’s agenda.