17 Февраля 2020 г. 18:23

Marina v.N. Whitman: Nobody is Winning in US-China Trade War

Marina v.N. Whitman: Nobody is Winning in US-China Trade War

In 2019, one of the most prominent topics in media was ups and downs of US-China Trade war. With Phase 1 of the Trump's trade deal with Beijing signed, a hope to end this confrontation and its negative effects on world economy finally emerged. Marina v.N. Whitman, professor emerita at the University of Michigan's Ford School of Public Policy talks to Eurasia.Expert on the likelihood of Trump Administration resolving the US-China trade issues for good and on the overall state of American Economy.

What was the year 2019 for the American economy? Is there growth?

– Year-over-year GDP growth of the US economy was 2.3% in 2019. This was the slowest pace since 2016, the year President Trump took office. This contradicted President Trump’s statement at Davos, that «the United States is in the midst of an economic boom the likes of which the world has never seen before».

He had promised growth of between 3% and 4%, but a continuation of about 2% is more likely, given the slow growth and aging of the US workforce and slowed productivity growth. The trade fight and continuing uncertainty are seen as major causes, although the global slowdown also played a role. The unemployment rate and the rate of inflation both remained low, while the stock market maintained steady growth throughout much of the year and incomes were rising.

Is it possible to say that the trade war between the USA and China had a positive effect on the American economy? Is Trump winning this war?

– The trade war between the US and China has had negative effects on the American economy, raising costs to the American consumer and, where costs of Chinese parts and components that are inputs into US manufactures are concerned, making these products less competitive worldwide. It has also created Chinese retaliation against American exports.

Nobody is «winning» in this war; the effects on both countries are negative. Above all, the trade war has created continuing uncertainty for business, which is widely believed to be exerting downward pressure on US business investment.

The U.S. trade deficit has expanded, not contracted, during Trump’s term of office. The recent signing of the USMCA agreement among the US, Canada and Mexico may reduce some of the uncertainty, but the United States has put substantial tariffs a on a variety of European products and is threatening to put a 20% tariff on imports of European cars and car parts on grounds of «national security».

The United States and China have concluded an agreement on the first part of a trade negotiation deal. The signing of the second part of the transaction is expected. Is the trade war between countries close to the end or not?

– The Phase 1 agreement on trade issues between China and the United States is focused mainly on increased Chinese purchases of American agricultural products, particularly soybeans, along with some relatively minor improvements on the conditions for US firms’ investment in China.

It does not address a major source of trade friction between the two countries, namely, Chinese government subsidies to a variety of that country’s exports.

That and related issues are presumably going to be addressed in the second phase of these negotiations; meanwhile, US tariffs remain on a wide range of Chinese exports.

No timetable has been set for the beginning of Phase 2 negotiations, indicating that the US-Chinese trade friction will continue. Among other things, this outlook is causing production of a number of Chinese inputs into US supply chains to be moved to other Asian countries.

After Donald Trump came to power, serious reforms were carried out, including tax cuts. How have economic reforms affected the US economy? Have Trump's reforms met the expectations of the Americans who voted for him?

– One major reform carried out during the first two years of the Trump Administration was a substantial tax cut. It benefitted mainly those in the higher levels of the income distribution, and also substantially reduced the corporate tax rate.

The other was a rush of deregulation, mainly in the areas of environment and safety, in response to heavy lobbying by interested industries. Many of those regulations had been introduced during the Obama Administration, although many were significantly older. One very prominent area was deregulation aimed at reviving the dying US coal industry.

Most economists believe that these measures gave some short-term stimulus to the US economy, but that the effect has almost certainly worn off by now. These changes were responsive to the demands of the «hard core» of Trump voters.

How do Americans assess the economic policies of the US administration? What do polls show?

– Polls suggest that many Americans feel that Trump is doing a better job on the US economy than he is doing overall; he is still very unpopular. Polls also suggest that Americans’ confidence in the economy has been increasing, with unemployment low, the stock market high, and earnings increasing, although not for everyone. Opinions differ, of course, on whether Trump or his predecessor, Obama, should get the major share of the credit.

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