After years of negotiations, President Donald Trump has recently agreed to a “Phase One” trade deal with China. Under the new trade agreement
, Washington will reduce some tariffs on Chinese imports in exchange for Chinese purchases of agricultural, manufactured and energy products, increasing by about $200 billion US over the next two years. The next phase of the agreement will attempt to resolve issues such as Chinese subsidies to state-owned firms and digital trade.
Alan talks about the hallowing out
of America’s manufacturing sector, which currently comprises 12% of GDP. In 1947, roughly 33% of Americans were employed by the sector, compared to less than 10% today. Some economists attribute this to a shift towards a knowledge-based economy.
Jason talks about the import of intermediate supplies used to make export goods, like the import of steel to make cars. You can read more about the intermediate goods trade and its role in the manufacturing sector here
Alan wants to see a decoupling of the Chinese and American economies. Many experts agree that in order to do this, US firms must re-orient their supply chains away from China, and eliminate the trade deficit between the two countries. You can read more about Trump’s ‘decoupling’ strategy here
Alan mentions the growing East Asian trade surplus with the US. The US goods and services trade deficit with ASEAN countries was $82 billion in 2017. The US services trade surplus with ASEAN countries was $10 billion, according to the latest available data. Meanwhile, the US goods and services trade deficit
with China was $378.6 billion in 2018.
Jason Furman’s Wall Street Journal op-ed
makes that case that Trump is losing the trade war with China
You can read Alan Tonelson’s blog on the economy and trade here