Question

Imagine you have recently been elected President of the United States (you are free to assume you are from any party and are free to pursue any policy you think is in the best interest of the country). Your security and military advisors are concerned about China’s growing wealth and military capability. You also have members of congress who want you to change policy towards China because American manufacturing jobs often leave the country and some move to China. Your Commerce Secretary emphasizes that the U.S. trade relationship with China provides consumers with cheap products and that we do sell some products to China, like Boeing commercial jets, which provide American jobs. Your Treasury secretary informs you that because of our trade deficit with China we are dependent on China to finance our budget deficit, and without Chinese money we would have to raise interest rates possibly causing a ecession or worse. Your Secretary of State cautions that China must be handled carefully because no matter what we do China will remain large, powerful country in Asia where we have vital security interests. Everyone is looking to you for the next move. What do you do?

Answer 1

China is growing powerful politically as well as economically. It is becoming nearly impossible to counter the rise of china in international arena. China supplies cheaper products to American thereby it increases welfare of American people. Further, there is negative impact of trade with china, mass influx of goods from china is killing domestic jobs and many of firms are shifting their production facilities to cheap labor market of china. Furthermore, china is market for capital goods of America. America supplies airplanes and other heavy products to china and thereby earns larger foreign currency from china. Such income is used finance various government activities.

Now question is that what kind of policy to be directed towards china. Here, President should not take direct action right away. There should be gradual shift towards other countries such as India and other south Asian countries. In this way, dependency on china shall diminish in near future and American would be able to take strict stance on activities of china.

Partially, American can announce heavy duty on the imports from china. It will help to save some jobs for America.