Tuesday November 8, 2016 marked a new age of American politics. Donald Trump shocked the world and became the 45th President of the United States of America. The controversial businessman captivated the American public with his unconventional rhetoric and "in-your-face" campaign style. Throughout his campaign to becoming President he proposed many agendas and ideas on what he thought it would take to "make America great again." One of his big talking to points during his campaign crusade was that he wanted to put America "first" again. Which means he essentially wants to initiate plans that benefit America first and then worry about the outside world. This was very controversial considering America has always done whatever they could to help other countries. However, Trump and his advisors believe that we as a country might be helping out others and suffering the consequences.
This idea of putting America first goes hand in hand with how he is dealing with international trade, most notably China. Donald Trump has often said that China is responsible for nearly half of our trade deficit and he believes that their government is manipulating their currency. To counter this, Donald Trump has proposed we slap a 45 percent tariff on all Chinese imports. The Trump administration says that this tariff would stem from years of China stealing jobs and manipulating the trade system. Recent studies have put the total job losses in the US associated with the Chinese at 2 million. Most of these jobs are in the manufacturing industry.
Fearing a significant tariff on their imports, China has now threatened to retaliate if these tariffs are in fact imposed. The Chinese government has relayed the message to the US government urging against these "outlandish" tariffs (McDonald). China's Commerce Minister Zhong Shan stated that the US and China are interdependent and bilateral trade relations would have an impact on the worldwide economy. They are afraid that if things start to escalate a trade war might be imminent (McDonald).
A trade war between the US and China would have significant impact on both economies. First, if trump imposes his tariffs, China's exports to the United States would fall around 25 percent. This means that China's annual economic growth would decrease by as much as 1 percent. If China retaliates and imposes a tariff on the US, its economic growth would as much as a quarter percentage point (Reuters). Not to mention the consumers that would ultimately suffer. If Chinese imports get taxed, then companies would be forced to raise their prices, which would then hurt the consumer of said products. Really what this comes down to is the US trying to decrease the trade deficit with China. There are several ideas out there on how to go about this. One idea was that instead of placing a tariff on all Chinese imports, just impose targeted tariffs instead. These tariffs would be put on products that face heavy competition from Chinese imports such as steel, machinery, and auto parts. Another way to decrease the deficit would be enhance service exports to China.
Like any problem, the best to solving one is through discussion. These tensions between the US and Chinese governments are very real and very serious. The two largest economies in the world are on the brink of a stand-off that could set both economies backwards. Sun Jiwen, spokesman for China's Ministry of Commerce, believes that these trade tensions will resolve through much-needed dialogue. However, it might take a little more than an open invitation for Trump to join the table of discussion. Trump is playing hardball. He feels that the US has been wronged since China has joined the WTO (World Trade Organization) in 2001 (Reuters). China has said they are willing to sit down with Trump administration to come up with a plan that could benefit both nations. China's President Xi Jinping has defended free trade on numerous occasions and stated that "no one will emerge as a winner" in an international trade war (Reuters).
These are significant times in our country. The US has always been at the forefront world leadership and it is interesting to see with this new administration how these problems will play out. Every decision has a consequence, good or bad. I hope the Trump administration weighs all of the options before irrationally making a decision. The fate of the United States economy depends on it.
McDonald, Joe http://business.financialpost.com/news/economy/china-is-preparing-to-retaliate-against-donald-trumps-tough-trade-stance-warns-american-chamber-of-commerce