2018 Recession: US-China Trade War Looms
Posted On April 4, 2018 2:27 pm
By: Steve Smith
By: Steve Smith
Tough Tech Talk
Trump’s notion that the trade deficit, which is actually $387 billion not the $500 billion he cites, indicates the U.S. is somehow “losing” is also misguided.
The bilateral deficit is also misleading because a large share of the value of goods we import from China actually originate in places other than China.
High-tech items such as the iPhone are assembled in China, but much of its total value is represented by components made in Japan, South Korea, and the United States. Yet under the U.S. government’s trade accounting system, the full value of the iPhone is classified as an “import” from China. When the components of imports from China are assigned to the country where the value was actually added, the bilateral trade deficit drops by an estimated 40%.
Where Trump does have a legitimate complaint is China’s lack of respect for, if not outright theft of, intellectual property.
Many think Trump is using the steel and aluminum tariffs as cudgel to get China to create a fairer playing field to U.S. companies, especially technology, without fear stealing or forcing to share ownership with Chinese entities.
To this end the Trump administration seems to be positioning to play hard ball which will ultimately lead to positive results as Commerce Secretary Wilbur Ross said, “Even shooting wars end with negotiations.”
Let’s just hope we don’t see a 2018 recession before one side rises the white flag.
Related: This Critical Market Threshold Could Mean Trouble for You
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