Question

Give the answer of all question in detail

The US President Donald Trump and his advisors have repeatedly said that they intended to get rid of the US trade deficit.

Question 01: What are the main industries responsible for this trade deficit? Support your answer with numbers (Words 200)

Question 02: What are the main countries responsible for this trade deficit? Support your answer with numbers (Words 200)

Question 03: As of April 8th 2018, list the goods and the countries for which the US has decided to create new tariffs. For these goods, what are the amounts currently imported by the US? (Words 250)

Question 04: List the US goods for which China has decided to create new tariffs. For these goods, what are the amounts currently imported by China? (Words 200)

Question 05: Assume that the new tariffs will decrease both US exports to China and Chinese exports to the US by 30% (only for the targeted goods). Building on your answer on questions 1 to 4, what would be the impact of the new tariffs on the US-China trade deficit? Support your answer with numbers (Words 200)

Answer 1

Answer to 1:

Main industries responsible for trade deficit:

In 2017, the us trade deficit was $566 billion. This is higher when compared to 2013. The reason is that value of dollar got increased by 28% between 2014& 2016 making imports cheaper and exports expensive. Hence trump wants to reduce this deficit so he decided to impose 25% tariff on steel imports & 10% on aluminum. But the stock markets fell which worried many analysts.

The industries that were responsible for trade deficit was consumer products and automobiles. In 2017, us imported $602 billion in generic drugs, clothing and household items. Whereas it only exported $198 billion of consumer goods. The difference of $404 billion added to the deficit. An in case of automobiles, it imported $359 billion worth of automobiles and parts and exported $158 billion thereby adding $201 billion to deficit.

Another is petroleum. The imports of petroleum products in 2017 were $183 billion which includes crude oil, natural gas, kerosene etc. this was less than $313 billion in 2012. This is because there have been new oil fields developed to the point of oversupply. The petroleum exports were only $71 billion. Hence petroleum trade contributed to another $92 billion of trade deficit.

Answer to 2)

Us trade with three countries namely Mexico, china & japan contributed to two thirds of trade deficit.

Trade with china has resulted in $301 billion in the past seven years. But considering china’s population of 1.2 billion, can we compare trade deficit with china to deficit with Mexico whose population is only 100 million. If we crunch the numbers, then it is $241 of trade deficit in last seven years which is less than $35 dollar per Chinese a year.

In case of japan, the country with whom us has the largest deficits. For each of the 126 million Japanese, on per capita basis then the deficit with japan is 14 times bigger than with china. In which case each Japanese is 14 times more responsible than Chinese for trade deficit in US.

Since 1993, US trade deficit with Mexico was $83 billion. This would be $829 per Mexican which is four times higher than trade deficit of Chinese. Hence Mexicans are in no way dangerous to US economy.

Hence the biggest culprit is to the north of US. US has more trade with Canada than anyone else. It has $129 billion of trade deficit. But at 31 million, Canada’s population is one twelfth of size of EU. Hence on per capita basis, it is Canada who are responsible for $4,184 of trade deficit.

Answer to 3)

List of goods and countries for new tariffs:

The US has announced 25% tariff on Chinese products which includes flat screen televisions, medical devices, aircraft parts and batteries and other 1300 imported goods which could be worth $50 billion in terms of estimated trade in 2018 in order to penalize china for its trade practices. This step was taken as a result of china’s dominance on semiconductors, electric vehicles and advanced medical products.

The list generally comprises of products                 that benefit from china’s industrial plans but having less effect on the US economy.

Please note: As the list has around 1,300 products, it is not possible to list them here. Hence rough idea has been given to the answer.

Answer to 4)

List of US goods for which china has come up with new tariffs:

This action was taken by china as a result of US’s new tariffs on china’s $50 billion worth of goods.

The list has around 128 products. Of them 120 range from dry fruits to steel pipes that receives an extra 15% import tax. While eight others have to bear a 25% tax hike. The list of eight will include seven kinds of pork products and aluminum scrap.

The goods which fall under 15% extra tax will account for $977 million of exports to china and the other that falls under 25% category will make up $1.992 billion. Which is the total of $3 billion.

Please note: As the list has around 128 products, it is not possible to list them here. Hence rough idea has been given to the answer.

Answer to 5)

It is known that US & china have the world’s biggest trading relationship. Exports to china from US were contributing to approximately 1.8 million new jobs in US. All these would get effected because of the new tariffs imposed by bot the countries.

But the impact of new tariffs has made a change. Where trump has indicated that he would like to go in for negotiation with china as it fears the investors because of the conflict.

There will be a gap of $500 billion due to America’s trade deficit with china. Whereas the gap that was existing last year with the Asian nation was $337 billion.

Still America hasn’t imposed the new tariffs on china’s 1300 items as it would take place only after 60 days of public feedback and would not take immediate effect as it would like to go in for negotiation talks with china.