Will the trade war become a real hot war betweem the USA and China?
A trade war between the two largest economies - US and China - seems unavoidable, and now starts. President Trump has not been happy with the trade deficit of ~$350 trillion a year with China. He wants to balance the trade by imposing high tariffs on the goods imported from China. Such tough action may not resolve the problem, but will worsen the economy of both countries. In other words, a trade war will not have a winner, although President Trump claimed that 'it's easy to win it'.
Let's look at the fact that China exports ~$500 billion goods to the States each year, and imports ~$150 billion goods from USA, resulting in the States having ~$350 billion deficits. Why does this happen? The USA does not allow to export high-tech goods to China because of national security issues. What if the States lifts such restriction on export? There is no answer to this though.
Second, let's look at the compositions of US and China economies, and then a big concern stands out. The US economy consists of 80% service sector and 20% physical economy (contributed by agriculture and industry; see the CIA World Fackbook website), whereas China economy is contributed by 52% service sector and 48% physical economy. This comparison indicates that China has produced much more materialized goods than the USA has, and those goods are needed for people daily life. However, US has produced much more services than China has, such as attorney services, medicare, consultation, finance. Although these services generate very high GDP, they hardly improve the quality of living standard and may not readily export to other country. Understanding this fact leads to President Trump worrying about the US economy and concerning the problems facing Americans, in particular those in the red states.
Third, let's look again at who has actually lost in the trade deal between the USA and China. ~$350 billion deficit means that US have goods imported from China, and the goods are used by Americans. The money is the money produced by the US Federal Central Bank (Reserve). That is it. Can China use this $350 billion to buy high-tech goods from the States. The answer was mentioned above, that is No. So, China has to use the money to buy the US treasury bonds (or the US government debts).
Now it is clear that USA has benefited much more from the trade with China. Nothing is lost in such trade deal, and get lots of goods that can be consumed by Americans. At the other end, China has produced and exported goods at cost of natural resources, polluting environment, and hard-working of millions of people in China who are suffering various health problems and mental stresses.
Do you think the trade war will continue? My conclusion is that the USA could have started a real hot war with China if China stops exporting goods to the States.
A trade war between the two largest economies - US and China - seems unavoidable, and now starts. President Trump has not been happy with the trade deficit of ~$350 trillion a year with China. He wants to balance the trade by imposing high tariffs on the goods imported from China. Such tough action may not resolve the problem, but will worsen the economy of both countries. In other words, a trade war will not have a winner, although President Trump claimed that 'it's easy to win it'.
Let's look at the fact that China exports ~$500 billion goods to the States each year, and imports ~$150 billion goods from USA, resulting in the States having ~$350 billion deficits. Why does this happen? The USA does not allow to export high-tech goods to China because of national security issues. What if the States lifts such restriction on export? There is no answer to this though.
Second, let's look at the compositions of US and China economies, and then a big concern stands out. The US economy consists of 80% service sector and 20% physical economy (contributed by agriculture and industry; see the CIA World Fackbook website), whereas China economy is contributed by 52% service sector and 48% physical economy. This comparison indicates that China has produced much more materialized goods than the USA has, and those goods are needed for people daily life. However, US has produced much more services than China has, such as attorney services, medicare, consultation, finance. Although these services generate very high GDP, they hardly improve the quality of living standard and may not readily export to other country. Understanding this fact leads to President Trump worrying about the US economy and concerning the problems facing Americans, in particular those in the red states.
Third, let's look again at who has actually lost in the trade deal between the USA and China. ~$350 billion deficit means that US have goods imported from China, and the goods are used by Americans. The money is the money produced by the US Federal Central Bank (Reserve). That is it. Can China use this $350 billion to buy high-tech goods from the States. The answer was mentioned above, that is No. So, China has to use the money to buy the US treasury bonds (or the US government debts).
Now it is clear that USA has benefited much more from the trade with China. Nothing is lost in such trade deal, and get lots of goods that can be consumed by Americans. At the other end, China has produced and exported goods at cost of natural resources, polluting environment, and hard-working of millions of people in China who are suffering various health problems and mental stresses.
Do you think the trade war will continue? My conclusion is that the USA could have started a real hot war with China if China stops exporting goods to the States.
