Is the US Trade Deficit a Problem?

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Do you think the U.S. trade deficit is a problem or not? Please feel free to share your thoughts based on our lectures, the video above as well as a recent op-ed written by Peter Navarro (Director of the White House National Trade Council) for the Wall Street Journal. 

 

International Trade, Globalization and the U.S. Economy: Discussion Questions Proposed by FASH455 Students

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The following questions are from students in FASH455 (Spring 2017). Please feel free to leave your comments and engage in our online discussion. Please mention the question # in your comment.

#1 Based on the readings, how do you see the relationship between “Made in the USA” and international trade today?

#2 What is your evaluation of President Trump’s proposal to levy 45% punitive tariffs on Chinese imports? Will the proposal bring back more jobs to the United States?

#3 It is said that globalization creates both winners and losers. From the readings, why do you agree or disagree with the statement?

#4 One of Donald Trump’s main campaign points was that he was going to bring jobs back to America and push for companies to move their factories out of countries such as Mexico and China. What role can international trade play in this effort?

#5 As we mentioned in the class, international trade is more than a purely economic issue. So what are the other non-economic impacts of trade? Can you provide any specific examples from the readings?

#6 As a result of globalization and trade, nature of the labor market is quickly changing, which has led to many workers without a college degree lost their jobs. In a market economy like the United States, is the government responsible for reeducating these workers or does the government bear no major responsibility?

#7 Is creating jobs in the United States a major responsibility for U.S. companies like Apple and Nike in today’s global economy? Why or why not?

New USCBC Study Suggests Overall Positive Impacts of China on the US economy

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Although the trade relationship with China is often blamed for causing job losses in the United States, a new study prepared for the U.S.-China Business Council (USCBC) by Oxford Economics suggests overall positive impacts of China on the US economy. According to the study:

  • China has grown to become the third-largest destination for American goods and services, only after Mexico and Canada. China purchased $165 billion in goods and services from the United States in 2015, representing 7.3 percent of all US exports and about 1 percent of total US economic output. By 2030, US exports to China are projected to rise to more than $520 billion annually.
  • The US-China trade relationship supports roughly 2.6 million jobs in the United States. Specifically, US exports to China directly and indirectly supported 8 million new jobs in 2015.
  • The reported gross US trade deficit with China is overstated and somehow misleading. As China has become an integral part of the global manufacturing supply chain, much of its exports are comprised of foreign-produced components delivered for final assembly in China. If the value of these imported components is subtracted from China’s exports, the US trade deficit with China is reduced by half, to about 1 percent of GDP—about the same as the US trade deficit with the European Union.
  • Additionally, “Made in China” lowered prices in the United States for consumer goods. As estimated, US consumer prices are 1 percent – 1.5 percent lower because of Chinese imports–trade with China saved each American household up to $850 in 2015. Given the fact that hourly labor costs in the textile industry were $2.65 in China in 2014 compared with $17.71 in the United States, the report argues that replacing Chinese imports of textiles and clothing with US manufactured products would significantly raise US consumer prices.

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In terms of the textile and apparel (T&A) sector, the report suggests that:

  • The rising U.S. import from China mostly represents China’s displacement of imports from other countries and regions: China has been squeezing out traditional apparel manufacturers such as Mexico, Hong Kong, and Taiwan.
  • Meanwhile, textile and apparel manufacturing is one of the very few sectors that observe a paralleled pattern of rising imports from China and declining gross value added in the United States since 2000. In comparison, over the same period other sectors that experienced the most rapid growth in Chinese imports are also the sectors where US businesses have seen the strongest growth.

The report can be downloaded from HERE.