In the past few decades, China has always seemed to have the upper hand when matters of international trade are involved. In fact, China has done so well against the US in the past that most in the Asian nation consider American to be ‘soft.’ But thanks to the Trump administration’s hard-line approach and ability to push back, things are beginning to change.
“Phase One” of the United States-China trade war resolution is proof. It was signed last week and got China to agree to increase imports from the US by $200 billion over the next two years, as well as cracking down on the theft of intellectual property.
President Trump told CNBC that the countries were “righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers, and families.”
According to Reason, the deal is still a pretty rough sketch and will keep most of the current tariffs in place, but it is a start. For years, China has refused to come to the table for any sort of discussion on this topic. So the fact that they have not only shown up but agreed to these stipulations is a massive move in the right direction.
It was thought that when discussions finally began, the US would be on the losing end, but now that doesn’t seem to be the case, especially as new reports on China’s economic growth for the last year are coming out.
According to Reuters, China’s economy grew at an average rate of about 6.1 percent in 2019, the lowest it has been in almost 30 years.
As the world’s second-largest economy and in comparison to the rest of the globe’s rates, this isn’t really slow by any standards. However, it is considerably less than the 6.6 percent it grew in 2018. And according to several experts, that growth is only expected to slow more, to as low as 5.9 percent.
The chief economist of Sony Financial Holdings in Japan, Masaaki Kanno, said, “We expect China’s growth rate will come further down to below 6% in 2020.” He continued, “The Chinese economy is unlikely to fall abruptly because of… government policies, but at the same times the trend of a further slowdown of the economy will remain unchanged.
To be clear, we aren’t celebrating over China’s slower growth. However, it appears to be a good thing for the US economy.
As China’s economy seems to be plateauing, there looks to only be mountain peaks ahead for the United States. Those peaks may not be as high as China’s, but they are certainly better than where we have been, as well as higher than expected.
CNBC reported in October that experts predicted the third quarter to have a growth rate of about 1.6 percent. But “The Commerce Department said Wednesday that the economic activity grew at an annualized rate of 1.9% in the third quarter.”
And the White House noted that these results created the longest run of economic expansion ever in US history.
A statement said, “As today’s advance Gross Domestic Product (GDP) release confirms, economic growth continued in the third quarter of 22019, beating market expectations and adding to the expansion’s record length. The release also confirms that the Trump Administration’s policies support sustained economic growth and lead to higher incomes for American families.”
The statement noted that before the 2016 election, the GDP was estimated to grow at around 2.1 percent for the first 11 months of the new administration. But under Trump’s diligent care, the GDP has grown at a 2.6 percent rate since the election. Compare that to the 2.2% it grew under Obama.
Now, it is noted that Phase One may not make that much of a difference. But if nothing else, it shows China how serious we are about being on an equal playing field.
George Mason University economist Tyler Cowen says, “The U.S. has established its seriousness as a counterweight to China, something lacking since it largely overlooked China’s various territorial encroachments in the 2010s. Whether in economics or foreign policy, China now can expect the U.S. to push back.”
Cowen notes that while the recent tariffs did, in fact, hurt the US a little, it led to a much greater gain. China can no longer consider the US to be soft on issues like this when we have proven that we are willing to endure a little pain for the greater good.