Question

In: Economics

Explain the trade relationship between US and China, and what are the effect on both sides...

Explain the trade relationship between US and China, and what are the effect on both sides and the world economy?

Solutions

Expert Solution

As we know that US and China are the biggest economies of the world in terms of gross domestic product. The US GDP is $19.485 trillion and the GDP of China is 12.238 trillion respectively. The US and China are in trade war with one another, By 1984, the United States had become China's third-largest trading partner, and China became America's 14th largest. The trade relationship between US and China is at certain times affected by the bitter relationship between the two. Inspite of the hard relationship between the two, the trade is growing day by day. The U.S. goods and services trade deficit with China was $378.6 billion in 2018. China is currently our largest goods trading partner with $659.8 billion in total (two way) goods trade during 2018. Goods exports totaled $120.3 billion; goods imports totaled $539.5 billion.

When we talk of US -China trade relationship we saw that China is exporting low priced goods to the US. The U.S. depends heavily on China for providing the low-cost goods that enable income-constrained American consumers to make ends meet. The U.S. also depends on China to support its own exports; next to Mexico and Canada, China is America's third largest and by far its most rapidly growing major export market.Today, the US-China trade relationship actually supports roughly 2.6 million jobs in the United States across a range of industries, including jobs that Chinese companies have created in America. And as the Chinese middle class continues its rapid expansion over the next decade (the number of Chinese middle-class consumers will exceed the entire population of the United States by 2026), US companies face significant opportunities to tap into a new and lucrative customer base that can further boost employment and economic growth. Economic data show that nations trading closely with China outperform nations with less integrated trade ties, and we expect this trend to continue.

The US-China trade war has it's impacts on the world as well. The trade war has injured the world economic integration. The evolving global scenarios of U.S.-China trade and technology conflicts are the outcome of an ever more anxious America forsaking its multilateral cooperative stances for primacy doctrines. In the worst case, these conflicts may escalate into a
“decoupling” of both economies and cause lasting global recession and new geopolitical confrontation. This gloomy scenario has become viable with the exceptional use of executive power by the post-9/11 U.S. administrations. The Trump administration, in particular, is predicated on “imperial presidency” that relies on an emergency status quo, new campaign finance, and “big money,” which poses significant risks not only to U.S.-China relations, but also to American democracy and existing international order. The US-China growing trade war tensions are also a threat to globalization.

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