An underwhelming trade deal forms

Stock markets rose Monday on hope for a trade deal between China and the United States after reports said the two sides were close to a breakthrough.

Trump has previously called the trade deficit "unsustainable" and said it represents a transfer of wealth from the United States to foreigners.

The widening gap was fueled by a steady US economy, leading Americans to buy more products from overseas.

Trump also slapped tariffs, which are a kind of tax on imported goods, on steel and aluminum imports, a move that led to retaliation from some US trading partners.

"This is a major reason why economists say, 'You really don't want this as your scorecard, "' said Phil Levy, a former senior economist for trade with president George W. Bush's council of economic advisers.

Cars: China is "speeding up the timetable for removing foreign-ownership limitations on car ventures and reducing tariffs on imported vehicles to below the current auto tariff of 15%".

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The trade war was only one factor affecting the US economy, Weinstein said, and with the USA less exposed to trade than other major Western economies such as Germany, it was not having as much of an impact as it might.

"President Trump should not fall into the trap of seeking a deal for the sake of a deal, especially now that the talks with Pyongyang are on hold", Schumer said on Thursday. Economists disagree about whether or not such a deficit is good or bad, since more importing could be an indicator of a healthy economy and consumers with more disposable income.

The immediate drivers of the surge in the trade deficit under Trump have been the fiscal expansion resulting from the tax cuts he pushed through Congress and the stronger dollar that resulted, partly from the juiced economy that expansion helped create. Yet evidence is growing that the USA economy is a net loser so far. USA and Chinese officials have recently signalled that they're close to some kind of agreement, although China has only bolstered its commitment to investing in and developing its technology sector and questions about how to enforce any trade rules remain. If the tariffs continue, about US$165 billion worth of trade would be redirected each year, they added.

Ethanol, now hit with a 70 percent tariff at the Chinese border. But that doesn't mean the trade war ends.

Trump wrote on Twitter on Friday that he had asked Chinese President Xi to "immediately" lift tariffs on USA agricultural products.

Each country can inflict economic pain on the other, but the latest deficit numbers underscore that the potential magnitude of that pain is greater for the export-dependent Chinese economy. If the tariffs led to the creation of 35,000 new manufacturing jobs - equal to all the steel and aluminum jobs lost in the past decade - they would cost US$195,000 per job, the study found.

(Copyright © 2015. All Rights Reserved.)
 
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