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>The Idea that the US is 'losing' due to the trade deficit and that reducing trade with China will benefit America is utter tosh and even the administration's o
by pytester 7y ago
>The Idea that the US is 'losing' due to the trade deficit and that reducing trade with China will benefit America is utter tosh and even the administration's own trade advisers and negotiators are saying so (a bit more politely).
The problem isn't so much the deficit as it is the way the US has been seduced into relying upon the Chinese industrial machine.
The US industrial base has been depleting for decades. This presents a serious systemic risk - the US relies more and more on Chinese industry which can (and probably will, at some point) be cut off. This will result in massive inflation.
In (neoclassical) theory getting cut off isn't a problem because the market will simply bring all of that industry back to the United States. In practice, the flow of goods can be cut off overnight but an industrial base on a par with the pearl river delta would take at least two decades to build.
- oblio 7y agoThe "depleting" US industrial base is producing 2x what it was producing in 1990: https://fred.stlouisfed.org/series/INDPRO https://fred.stlouisfed.org/series/INDPRO :) Which is pretty good growth, all things considered. Mini-rant, feel free to ignore: The alternative perspective which assumes total US industrial domination up to the present day (MAGA/Trump) is quite irrational considering world history: the US had almost no real industrial competition post-WW2 when all the other industrialized countries were either: * shattered by wars in their homelands * or completely cut-off from the rest of the world for 50 years... So the industrial prowess of the US 1950 - 1970 (relative to the rest of the world) isn't coming back, now we're just headed for a normal equilibrium. One in which the US is still doing quite well from an industrial point of view.
- simonh 7y agoProduction is up, but jobs are down to about half as much as a proportion of the population, and by about a third in real terms. But then unemployment is quite low right now and there are plenty of un-filled jobs. Pay for low wage earners has seen some encouraging gains over the last few years. It's not clear the US actually needs a huge boost in manufacturing jobs. Historically, attempts to preserve or boost jobs artificially through trade manipulations have had limited success at massively disproportionate costs. Anyway in absolute terms manufacturing jobs aren't exactly low, it's at about the same level as in 1949.
- stillworks 7y ago>This will result in massive inflation. I hope there was a reliable way to simulate the outcomes. 1) Inflation is one plausible outcome. 2) The trade deficit exists due to US (and most of the western world's) appetite for consumption I guess. Let's say if the price of a gadget (or any other product/consumable) I "may need" goes up beyond a certain point then I am not buying OR I am curtailing consumption. How long will that take to result in deflation ? 3) The for-profit companies may decide (but I guess not) to accept reduction in profits ? But then the securities markets will see the downward trend. Unless there are smart people who can simulate and say which outcome is most likely... it seems inflation it is.
- simonh 7y agoWhy do you expect Chinese industry to be cut off from the US?