The trade balance for the five years from 2014-2018 and are listed below:(Branch 1):
Fig 1. (Blazyte 1).
Fig 2. (Buchholz 1).
The U.S. trades with China from 2014-2018 was a major source of the United States’ imports. The share of China has steadily increased, rising to $296, 373.9 million translating to about 20.17% by 2014. On contrast, independence of China on American imports reduced gradually, with American imports accounting to 7% of China’s import since 2000 (Blazyte 1). The U.S. trade deficit with China has increased by over 11% from 2014 to 2018 (Blazyte 1).
The trade between the U.S. and China has rapidly grown over the past. American exports to China has remained nearly constant from 2014 to 2018. However, exports in China have increased faster than imports, leading to an overall trade surplus. On contrast, American imports have grown faster than exports leading to a trade deficit (Buchholz 1).
The consequences of trade balance on the economy of China is, however, given the sheer scale of the United States deficit financing requirement—a budget deficit of about $483 billion and prediction of the deficit tripling of the next ten years—opinions in the currency and bond markets are delicate. An impulsive action by China, shifting out of America dollar-denominated instruments or a pronouncement of such a move, could act as a trigger, which jumpy market opinions cleave around, resulting in a sharp fall in the U.S. dollar value and bond prices.
China and U.S. are two the two economic giants in the current world, and the form of their relationship has been extensive affecting the smooth functioning of the world financial systems and trade.
Since China’s entry into the World Trade Organization in the year 2001, the unexpected growth of China trade with the U.S. has dramatically affected the U.S. domestic economy and employees(Branch 1). Despite the broadly applied tariffs, the value of American imports from China increased by about 11% from 2014-and 2018(Buchholz 1). Even though it would be expected that tariffs increase the U.S. prices as well as induce businesses, consumers, and public sector to buy less from China, a convergence of factors mitigated the effect (Blazyte 1). For instance, the influential American economy, which was occasioned by a notable growth especially in 2018, perhaps offset some of the price impacts of the tariffs. With increasing income, higher prices can be afforded. For countless of American producers whose supply chains run through China, the temporary costs of finding fresh sources in other nations or deporting production to the U.S. were perhaps too high to cause a huge shift in the 2018 patterns of consumptions. That is, enduring the tariffs might cost lesser compared to the investment required to prevent them. Besides, a slowing China economy, marked by decreasing domestic prices as well as the weakening of the Chinese currency, may be causing the prices for Chinese exports quite low, lessening further the inhibitive impacts of Trump’s tariff. In fact, the sluggish Chines economy also assists to explain the key contributor to the increasing trade deficit of the U.S. with China: Stagnant American exports. While America imports from China increased by 11.3% from 2014-2018, American exports to China that were subject to retaliatory, comparable Chinese tariffs, registered a slight decrease in 2018, and a more massive increase in 2017 since 2014. With the growth of economies, demand for imported and domestic services and goods tend to increase. With the contraction of economies or when the economy’s growth slows, the need for both tends to decline. Other than the slowing Chinese economy, there are several reasons for the stagnant American export growth with China since 2014.
The increasing trade deficits mean American employees and domestic industries will continue to suffer since people would prefer to go for cheaper electronics, computers, and clothing from China, even if it implies other U.S. citizens lose their jobs. American companies that cannot compete with cheap goods from China must lower their prices or close up their business. Most of the American businesses minimize their cost through outsourcing job to China. Outsourcing adds to America unemployment. Other U.S. industries have dried up. American manufacturing as measured through the number of jobs was recorded to have reduced by about 35% between 1998 and 2010. With the decline of these industries, so has the American competitiveness in the world marketplace.
Blazyte, Agne. “Infographic: U.S. Trade Deficit With China Grows As The Trade War Heats Up.” Statista Infographics. N.p., 2019. Web. 17 Feb. 2019.
Branch, Foreign. “Foreign Trade – U.S. Trade With China.” Census.gov. N.p., 2019. Web. 17 Feb. 2019.
Buchholz, Katharina. “Infographic: U.S.-China Trade Deficit Keeps Growing Despite Tariffs.” Statista Infographics. N.p., 2019. Web. 17 Feb. 2019.
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