Question

Much ado has been made about the trade relationship between the United States and China.

The US has a very large trade deficit in goods and services with China.

a)Do you believe the U.S. benefits as a result of its trade relationship with China? Or do you think the U.S. loses out?

b)If the U.S. has a large overall trade deficit in goods and services (composed in large part of its deficit in goods and services to China), what else exists to balance that out? And is this other thing good or bad for the United States?

Answer 1

a)

Yes, we do think that US is being benefitted as a result of its trade relationship with china. US is getting cheaper goods or electronics items from China at very cheaper rate. It is saving a lot of money of US consumers. Now US consumers are relatively better off on account of rise in consumer surplus.

There are negative impacts of trade deficit as well. US losing out its job due to imports of electronics from China.

b)

US and China trade deficit has reached over the $ 380 Billion dollars. US is using tariffs to balance out such large trade deficit. Tariffs in China made goods would help to reduce the imports from China. Further, US government is pressurising chinese government appreciate its currency value. Chinese currency is undervalued.