The U.S. And China: Who Has The Leverage In Trade

There are sharply different opinions about which country, the U.S. or China, is in the stronger position in regard to their trade differences.

Gordon Chang believes that the U.S. is in a much stronger position. “China Can Huff and Puff,’ But U.S. Holds ‘Almost All the Cards’ in Trade Fight.  “The United States has “enormous leverage” over China that can be used to bend the Chinese government’s trade policies.”

Chang framed China’s trade policies as designed to harm America’s economy. “In terms of trade war, #China for decades has been trying to undermine the American economy. Whether we call it a ‘trade war’ or whether we call it just ‘trade friction,’ Beijing has been trying with predatory means, and especially with a much more mercantilist attitude, to game the system.”

“I don’t think we have to worry too much about Beijing.  The reason is that we are the trade deficit country when it comes to China.” “Last year, 88.8 percent of China’s overall merchandise trade surplus related to sales to the U.S.  This means there’s tremendous leverage that we have because they need access to our market. We don’t need them nearly as much as they need us.  Also, we’ve got a much larger economy; over $19 trillion. They say their economy’s over $12 trillion, but it could very well be less.  Furthermore, we’ve got a stable economy, and they’ve got a fragile one heading towards a #debt crisis. You put that all together, and it gives the United States enormous leverage.  In addition, President Trump, unlike his predecessors, understands the American power that we have and the imbalance in power between China and the United States.”

In contrast to Chang’s views, China has promised a strong response to any measures taken by the United States.  China is not afraid of a trade war.”  This from China’s the vice minister of finance, Zhu Guangyao. He cited the history of the “new China” as evidence that it would “never succumb to external pressure.”

And in the political realm, Mr. Xi enjoys advantages that may allow him to cope with the economic fallout far better than Mr. Trump can.  His authoritarian grip on the news media and the party means there is little room for criticism of his policies.  Meanwhile, Mr. Trump must contend with complaints from American companies and consumers before important midterm elections in November.

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