September 25, 2018 – According to Trump, the protective tariffs are intended to eliminate the “unfair” US trade deficit with China, protect jobs in the US and prevent further “theft” of intellectual property and American technology.

The fact is that the numbers of the trade deficit “do not capture the true size of US business in China,” according to the study by Deutsche Bank Research. Part of this US business in China is that US companies such as Apple or General Motors produce in China and have sold more iPhones and more cars there than in the USA itself. Furthermore companies from Japan and South Korea produce large quantities of goods in China, which are then exported to the USA.

Deutsche Bank Research has taken these facts into account compiling an “aggregate sales balance”. Accordingly, the deficit of US sales to China shrinks to 10% of the trade deficit from $375bn to $30bn. The two authors estimate that this deficit has now even reversed to a surplus in US sales to China of $20bn in 2017.

The trade balance does not capture the results of US direct investment in China and the resulting sales to China, nor exports from third parties such as Japan and South Korea to the US from China. Therefore, the two authors describe the use of the bilateral trade balance as “misleading” – a judgement endorsed by the Quest Report.

In addition, the authors of the study point to asymmetry. This asymmetry consists of the fact that US companies produce and sell all over the world, whereas this is only the case for companies from Japan, South Korea and some European countries. As a result, the US has achieved an aggregate sales surplus that has risen from $200bn to $900bn in the 10 years from 2005 to 2015.

To ignore these facts, the Quest Report calls the Trump administration's approach as misleading and hypocritical.

The new Quest Report is available with all sources on https://www.quest-trendmagazine.com/en/global-economy/outlook/trade-war-between-the-us-and-china.html

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