Trading with China, how is it going?

Trading with China, how is it going? 1

Earlier this year President Trump began giving China demands that were all over the map, at one point demanded that China reduces its bilateral trade surpluses, later demanded that it drop the “Made in China 2025” technology initiative, and now it eliminates tariffs that adversely affect voters in the U.S.

Trump has made a big deal of the bilateral trade imbalance. However, economists do not see this as a problem because China’s overall current account surplus, the broadest measure of trade, was down by 1 percent of the GDP in 2018. China has shortages with many countries that export natural resources and surpluses with some advanced economies, like the United States, that import manufactured goods.

A second and more important issue is that China has many market access restrictions. For many years, China had a 25 percent tariff on auto imports. That has been reduced

 

to 15 percent, but such taxation is still high in today’s world. This was a good start and in promising an area in which Washington could make real progress in negotiations in the future.

A third issue closely related to the second is technology competition between these two biggest economies in the world. These two spend the most globally, on research and development, and there will naturally be competition to develop the technology in the future.

 

The war on trade began in early 2018 with U.S. tariffs on solar panels and washing machines, and has now escalated to covering $250 Billion of U.S. imports from China. Resulting in China imposing tariffs on most of its imports from the U.S. These actions are inconsistent with World Trade Organization.

Throughout time, the cost of these tariffs will grow. The United States is confident in the choice to begin the trade war with China because of one main reason being that U.S. imports from China exceed U.S. exports to China.

 

Though some industries in the United States are seeing price drops. The United States soybean producers are experiencing market price drops. In most recent events, China will be announcing the first batch of U.S. soybean purchases where most will be intended for state reserves, according to government officials.

The State Council will make a final decision in the next month, details to be decided include whether the volume should be 5 million tons or 8 million tons and if commercial companies should buy a further 2 million tons and be reimbursed for the 25 percent tariffs.

President Donald Trump and Chinese counterpart Xi Jinping pledged during the G20 meeting in Argentina to resolve the trade tensions that have disrupted global commodity flows. The resumption of U.S. soybean purchases will provide some relief to American farmers who have seen exports to the world’s biggest consumer drop and domestic inventories grow.

Ministry of Finance officials led a meeting recently to discuss resuming American imports. It remains unclear whether the purchases will be made this month and if the shipments will be taxed first and reimbursed later, or if it will follow a cut in tariffs.