US President-elect Donald J. Trump has been vocal and critical about China’s economic involvement in the USA. The US has struggled with economic growth since the nineties and struggles to compete with competitive emerging markets such as China. Since the confirmation of his election, he has been congratulated by the Chinese President Xi JinPing who also said that cooperation between the two nations would be the best way forward for both economies.
One of the key policies that Donald Trump voiced throughout his campaign was negotiating fair trade deals that would create more American jobs, increase American wages and reduce America’s trade deficit. On Donald Trump’s campaign website, a graph shows a 40% increase in the US-China trade deficit from 2009 to 2012. Currently, China has a $334 billion trade surplus with the US, which Trump would like to see minimized by implementing a 45% tariff on imported goods from China.
If this were to happen, the Chinese President said,
“When the time comes, large orders for Boeing planes would switch to Europe, U.S. auto sales in China would face setbacks, Apple phones would essentially be crowded out, and U.S. soybeans and corn would be eradicated from China.”
China has essentially sent Trump an indirect statement that Trump cannot win a trade war with China. For example, American smartphone manufacturers are dependent on China to make technologically advanced mobile phones like the iPhone. Should a trade war begin, China can simply redirect its manufacturers to create Chinese produced smartphones that will be competing against American products.
Even though Donald Trump has promised to bring jobs back to the US from China, the reality is that the labour costs in the US are too high and it is only economically feasible to partner with Chinese companies to create cost-effective products.
Could Trump’s rhetoric hurt the relationship between the US and China?
Another one of his selling points during his election campaign was to “instruct the Treasury Secretary to label China as a currency manipulator.” Many people are expecting him to take action against China on the first day of his presidency, however it is likely that he will need to withdraw his statements to build a strong relationship with China’s political administration.
However, China is said to love Trump despite what he said on his campaign trail.
According to the New York Times, this is because the globalization agenda that has been pushed by the US for decades through countless administrations is set to be dismantled as Donald Trump elects to focus on domestic issues that involve rebuilding a nation. Should this occur, then concessions might be made to favour US economic gains.
One man’s loss is another man’s gain.
If the US adopts a more closed market, it will create a bigger opportunity for neighbouring countries to fill the economic vacuum that the US leaves behind. For example, the ink cartridge manufacturers could increase their product for their own internal market and neighbouring countries such as India, Australia and Indonesia.
Donald Trump’s goal to put ‘Americans First’ has been a good sales line for the American people, however China is set to win either way the Trump decides to play his cards. By threatening to curb the Chinese economic presence in the US, China can easily retaliate with the same actions with it having a more significant impact on the US. If things stay the same or are built upon what already exists, it is likely that the trade deficit is unlikely to change and could even expand under the Trump administration.