Business and Economics

US-China trade: Tumbling down 3-31-18

Source: "War games - U.S.and China trade"  

US SuicideThe US under Trump wants to reduce the US-China balance of trade, now titled about $300 billion a year in favor of China. Also, Trump is citing intellectual property theft as a concern. "...by pressing American companies to hand over their technology when they form partnerships with Chinese ones (this is often a condition of operating in China), and by making it hard to enforce intellectual-property rights once a technology-related contract ends, the Chinese state has rigged the system against American companies."

Blocking Chinese investment in US companies would reduce the threat of intellectual property theft. One action..."would be tighter rules on investment between the two countries. The details are unclear. The president can already block investment on national-security grounds, using the Committee on Foreign Investment in the United States (CFIUS)."

Regarding the trade imbalance, it is caused by multiple factors. In fact,a high imbalance is a sign of a prosperous economy on our end. From the article: "Another risk stems from Mr Trump’s obsession with the bilateral trade deficit. No deal can guarantee to bring it down. Whatever the two sides agree to, the fact is that trade is devilishly difficult to manage. Factors beyond China’s control could easily overwhelm the impact of any deal on the bilateral trade deficit. Mr Trump’s cuts to income and corporate taxes mean that America’s economy is about to receive a large stimulus. All else equal, this will suck in imported goods."

"As for Chinese investment in America, the CFIUS committee was already toughening its oversight. According to Rhodium Group, a research firm, this was part of the reason Chinese investment in America fell by 35% from 2016 to 2017 (a Chinese clampdown on outbound capital was the main factor). New rules that give wide discretion to the president, or block investment on economic rather than national-security grounds, could easily be abused."