¡¾Special attention¡¤China-US economic and trade friction¡¿

Since the US government has been escalating its trade war with China, the US and China have been criticizing the US government. More and more people are questioning or even not optimistic about the US government's trade war expectations. The statement made by Utah Governor Gary Herbert a few days ago represents the increasing rational understanding of the US and China: the way to resolve trade disputes is the same as the way to promote the resolution of other problems, that is, to sit down and talk with a sincere attitude.

1. The theory that the US suffers from trade is untenable

This is true. The trade deficit between the US and China is determined by the characteristics of the two countries at different stages of development, and there is no need to escalate to the point of tension. The Trump administration always claims that the US trade deficit with other countries makes the US suffer. In fact, the formation of the US trade deficit with China is due to both the US itself and the different international division of labor between China and the US. The trade deficit does not mean "suffering a loss". The US can also benefit from trade. For example, cheap imported aluminum is conducive to the manufacture and export of US aircraft.

Riley Walters, a researcher at the Heritage Foundation, a US think tank, once wrote that trade deficit is not a measure of wealth loss. Trade deficit is only a measurement method for examining the goods and services of the two countries, including investment and capital flows. It does not reflect the actual wealth of the American people. Just as consumers cannot go out to spend the value of their per capita national income, per capita trade deficit will not cause losses to people's accounts. However, household wealth, or simply the availability of household products such as mobile phones, is the measure of the improvement in the living conditions of the American people, not the trade deficit. Some economists believe that using trade deficit to measure the gains and losses between countries is an old idea from decades ago. It is incredible that many senior economic officials in the US government are still thinking about this issue with outdated thinking.

It is true that from the perspective of US-China trade in goods, both the US and Chinese statistics show a US deficit. But in the service trade data, the US has maintained a long-term surplus with China. Therefore, when looking at the trade issues between the two countries, the US government cannot only talk about trade in goods. Riley Walters further pointed out in the article that it is natural for a developed country like the United States to develop a service-oriented economy. In the United States' exports, service trade accounts for one-third of the total trade volume. Compared with 2008, the United States' service trade with China has increased by 350%.

2. American consumers will pay for the price increase

Matthew Shea, president of the China Retail Association of the United States, said recently that the Trump administration's trade war measures pose huge risks to American consumers and workers, "while we can still climb out, let's not dig ourselves a deeper hole." Chad Brown, a senior fellow at the Peterson Institute for International Economics, and others wrote that the US government's decision to impose tariffs will increase the cost of American consumers, and those American companies that rely on imports from China will be the most negatively affected by the tariffs.

According to the Wall Street Journal, the United States' practice of imposing tariffs on imported metals and parts has already had an impact on American consumers, leading to price increases for a variety of consumer goods. Caterpillar, a US heavy machinery manufacturer, said that due to the US tariffs on Chinese imports, the company will spend an additional $100 million to $200 million on raw materials in the second half of this year. General Motors, a US manufacturer based in Detroit, has lowered its full-year profit forecast due to concerns about rising tariffs. According to the US Axios website, affected by the tariffs, US manufacturers will pass on the price difference to consumers for the increase in the prices of imported steel and aluminum. For example, Coca-Cola recently said that it had to raise the price of beverages sold in North America because the prices of plastics and aluminum are rising. Data from the US Department of Labor showed that the US consumer price index rose 2.9% in June this year from the previous year, the highest increase in more than six years. In addition, according to the website of the Nihon Keizai Shimbun, the trade war launched by the United States has had a negative impact on the US real economy. General Motors and home appliance giant Whirlpool recently lowered their performance expectations due to the increase in the prices of raw materials needed for corporate production. Not only that, Jamie Dimon, CEO of JPMorgan Chase, said that the trade war will have an impact on the psychology of companies and consumers. Data show that the current confidence of American consumers is deteriorating.

3. It will be American companies that will suffer the consequences of additional tariffs

In a recent media interview, Maurice Obstfeld, chief economist of the International Monetary Fund, said that the US attempt to reduce the trade deficit by imposing additional tariffs is misguided. Some economic experts analyzed that the reason why the US government wields the tariff stick against China is to force American companies to shut down the supply chain from China by increasing the price of imported products from China, so as to fundamentally change the situation of the US-China trade deficit. However, such means have caused great damage to American companies. There are countless companies in the United States that are highly dependent on the Chinese market and the Chinese supply chain, especially in the field of technology. When small companies that lack financial reserves face the cost increase brought by tariffs, they can only increase the price of the products they sell. The result of this is likely to be that these small companies will be eliminated by the market. Although large companies with strong financial resources can bear the cost of tariffs themselves, this self-digestion will not take long, and the price increase will eventually be transmitted to consumers.

Even if American companies consider replacing supply chains from China, it may not be so easy to find supply chains that can replace China in the United States or other regions. Recently, the New York Times wrote an article analyzing that in order to circumvent high tariffs, American companies will only transfer the last step of the production plan, namely the assembly link, from China to other countries such as Southeast Asia, rather than bringing it back to the United States, because the cost of blue-collar labor in the United States is too high to establish the supply chain required for companies to produce products. At the same time, these American companies will still leave the manufacturing of a long list of parts including wires, screws, electric motors and CNC equipment in China. Such a result will not bring much improvement to the United States' own overall trade deficit, but only redistribute the trade deficit with other countries. Based on this, the trade war that the US government has spent all its efforts to launch is likely to be more harm than good.

4. It will be China, not the United States, that wins the trade war

The US government accuses China of undermining the existing international economic order, but in fact, there are many people in the United States and China who are holding high the banner of international economic and trade mutually beneficial cooperation and who are undermining the existing international economic order. On August 8, Mary Lovely, professor of economics at Syracuse University and researcher at the Peterson Institute for International Economics, wrote in the New York Times that despite the escalating trade frictions, China seems to be further increasing its investment in the international supply chain. The current US government, on the contrary, is determined to isolate US manufacturing companies from the international supply chain. China recently relaxed restrictions on foreign investment in banking, agriculture, automobile and heavy industries, and Tesla has become the first foreign automaker to be allowed to build a wholly-owned factory in China. These send a strong signal to foreign investors: Even in the face of intensified trade frictions, China is still committed to working with international partners to further promote economic openness.

Faced with the US government's willful unilateral trade policy, Mary Lovely believes that the practice of intensifying tariffs on Chinese products will not allow the United States to win the trade war with China; on the contrary, this approach will allow China to win. She said in the article that the tariffs imposed by the Trump administration on China will actually impact many American companies with factories in China, and China's exports to the United States only account for 3% of China's manufacturing revenue. Therefore, even if the United States reduces its demand for Chinese products and causes losses to Chinese companies, it will not be catastrophic. When China's retaliatory measures against the United States take effect, American consumers will face rising prices for computers, clothing and other products. The article finally concluded that it is China, not the United States, that will continue to improve its position in the world, because China is where the future is created.

(Washington, August 12, our reporter in Washington, Tang Xianying)

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