By Donald A. Steinbrugge via Iris.xyz
The highly-publicized trade war between the US and China has largely been scrutinized for its apparent, short-term impact on the US economy. The conversation has narrowly focused on falling GDP growth and specific sectors of the economy which have been disproportionally hit the hardest, especially the American farmer. These are certainly important issues that should be continually considered and addressed.
At the same time, it is imperative to analyze the trade war from a broader, long-term perspective. The chart below illustrates the trade relationship between the US and China each year since 2009. Generally, free markets should correct trade imbalances over time. However, the US and China have not operated in a truly free market.
China has unilaterally engaged in a trade war with the US for over a decade, by limiting US companies’ access to its markets and by allowing Chinese firms to blatantly ignore trade and patent laws and copy US technology. These policies have resulted in over a $1 trillion trade deficit between the US and China over just the past three years.
Even more alarming is the breakdown by industry of the US net trade with China depicted in the following chart. A significant amount of the net exports from the US to China are low margin commodities like farm crops, oil and gas, mineral ores, and forestry products. Most of the net imports are high margin finished goods.
Read the full article at Iris.xyz.
