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Report Examines Impact of Trump’s China-Trade War

How exactly has America gained from former President Trump’s much-discussed trade war with the world’s second-largest economy?

A recent report from the U.S.-China Business Council (USCBC), titled “The US-China Economic Relationship,” details how it claims the U.S. has benefited from trade and investment flows with China.

The council, a nonpartisan, nonprofit organization of more than 200 American companies that do business with China, said the combination of bilateral trade, investment and supply chain integration has supported economic growth, consumer choice and job creation. In 2019, exports to China supported 1.2 million jobs in the U.S. and as of 2018, 197,000 people in the U.S. were directly employed by Chinese multinational firms, the report details.

U.S. companies invested $105 billion in China in 2019, according to the USCBC, “and the profits from these investments and the contribution they make to the competitiveness of U.S. businesses help support the U.S. economy through R&D, domestic investment and dividend payments.”

“With China forecast to drive around one-third of global growth over the next decade, maintaining market access to China is increasingly essential for U.S. businesses’ global success,” USCBC said.

The group’s take is that the trade war with China hurt the U.S. economy and failed to achieve major policy goals outlined by the former Trump administration. Not noted in the report, President Biden has said he would continue the tariffs imposed by the Trump administration on the basis of China’s unfair trade practices as “leverage” in negotiations with China.

Most trade policy experts do not expect Biden to impose further tariffs. The domestic textile sector has urged that the tariffs remain in place until China reforms its policies, adding that duties maintain an even playing field.

“Rather than benefiting the economy, it has reduced U.S. economic growth and employment, resulting in an estimated peak loss of 245,000 jobs,” the report said. “Tariff rates remain at a multidecade high despite both countries reaching a Phase One trade agreement in early 2020. While the agreement made important progress on longstanding trade barriers in agriculture, financial services, and intellectual property protection, it failed to address a range of administration concerns over Chinese state-owned enterprise disciplines, distorting subsidies, data and cybersecurity, and other areas of market access.”

While the trade deficit with China did narrow in 2019, this was offset by an increased trade deficit with the rest of the world, leaving the overall U.S. trade deficit broadly unchanged.

USCBC said scaling back tariffs would likely benefit the U.S. economy and create jobs, something trade experts have told Sourcing Journal is possible. Even a moderate rollback in tariffs could increase economic growth and stimulate employment growth, the council said.

“Under our trade war de-escalation scenario, where both governments gradually scale back average tariff rates to around 12 percent compared with around 19 percent now, the U.S. economy produces an additional $160 billion in real gross domestic product (GDP) over the next five years and employs an additional 145,000 people by 2025,” USCBC said. “U.S. household income would be $460 higher per household as result of increased employment and incomes as well as lower prices.”

Escalating trade tensions and a significant decoupling with China would hurt the U.S. economy further and reduce employment, the council contended. Its trade-war escalation and decoupling scenario sees the U.S. economy producing $1.6 trillion less in real GDP terms over the next five years and results in 732,000 fewer jobs in 2022 and 320,000 fewer jobs in 2025.

“In addition to a significant near-term shock to economic output, long-term effects would permanently lower GDP, reflecting lower economic productivity,” USCBC added. “By the end of 2025, U.S. households will have lost an estimated $6,400 in real income.”

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