FacebookTwitterGoogle+RedditEmail

Does the US Have Any Leverage on China?

With Donald Trump’s trade war with China heating up I thought I should bring in Mr. Arithmetic to clarify the situation. Trump apparently thinks that he holds all the cards in this one because the U.S. imports much more than it exports to China.

As I pointed out previously, China has other weapons. For example, it can just stop respecting U.S. patents and copyrights altogether, sending items all over the world that don’t include any royalty payments or licensing fees. This could reduce the price of patented drugs by 90 percent or more and make all of Microsoft’s software free.

But even ignoring the other weapons that China has in a trade war, the idea that the idea that the country can’t get by without the U.S. market doesn’t fit the data. At the most basic level, China exported a bit more than $500 billion in goods and services to the United States last year. This comes to a bit more than 4.0 percent of its GDP, measured on a dollar exchange rate basis.

As many analysts have noted, much of the value of these exports is not actually valued-added in China. For example, the full value of an iPhone produced in China will be counted as an export to the United States even though most of the value comes from software developed in the United States and parts imported from other countries. Perhaps 40 percent or more of the trade deficit reflects value-added from other countries. (On the flip side, many of the imports from other countries include value-added from Chinese products.)

But let’s ignore this issue. Suppose Donald Trump’s get tough trade policies reduce our imports from China by 50 percent, a huge reduction. This would come to roughly 2.0 percent of China’s GDP. Will this have China screaming “uncle?”

Probably not, as Mr. Arithmetic points out, China’s trade surplus fell by 4.4 percentage points of GDP from 2008 to 2009, yet its economy still grew by more than 9.0 percent that year and by more than 10.0 percent the next year. While all of China’s annual data should be viewed with some skepticism, few doubt the basic story. China managed to get through the recession without a major hit to its growth.

Of course that drop in exports was due to an unexpected economic crisis, this one would be due to a politically motivated trade war. Mr. Arithmetic does not expect China to be giving in any time soon.

This column originally appeared on Beat the Press.

More articles by:

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

September 18, 2018
Conn Hallinan
Britain: the Anti-Semitism Debate
Tamara Pearson
Why Mexico’s Next President is No Friend of Migrants
Richard Moser
Both the Commune and Revolution
Nick Pemberton
Serena 15, Tennis Love
Binoy Kampmark
Inconvenient Realities: Climate Change and the South Pacific
Martin Billheimer
La Grand’Route: Waiting for the Bus
John Kendall Hawkins
Seymour Hersh: a Life of Adversarial Democracy at Work
Faisal Khan
Is Israel a Democracy?
John Feffer
The GOP Wants Trumpism…Without Trump
Kim Ives
The Roots of Haiti’s Movement for PetroCaribe Transparency
Dave Lindorff
We Already Have a Fake Billionaire President; Why Would We want a Real One Running in 2020?
Gerry Brown
Is China Springing Debt Traps or Throwing a Lifeline to Countries in Distress?
Pete Tucker
The Washington Post Really Wants to Stop Ben Jealous
Dean Baker
Getting It Wrong Again: Consumer Spending and the Great Recession
September 17, 2018
Melvin Goodman
What is to be Done?
Rob Urie
American Fascism
Patrick Cockburn
The Adults in the White House Trying to Save the US From Trump Are Just as Dangerous as He Is
Jeffrey St. Clair - Alexander Cockburn
The Long Fall of Bob Woodward: From Nixon’s Nemesis to Cheney’s Savior
Mairead Maguire
Demonization of Russia in a New Cold War Era
Dean Baker
The Bank Bailout of 2008 was Unnecessary
Wim Laven
Hurricane Trump, Season 2
Yves Engler
Smearing Dimitri Lascaris
Ron Jacobs
From ROTC to Revolution and Beyond
Clark T. Scott
The Cannibals of Horsepower
Binoy Kampmark
A Traditional Right: Jimmie Åkesson and the Sweden Democrats
Laura Flanders
History Markers
Weekend Edition
September 14, 2018
Friday - Sunday
Carl Boggs
Obama’s Imperial Presidency
Joshua Frank
From CO2 to Methane, Trump’s Hurricane of Destruction
Jeffrey St. Clair
Maria’s Missing Dead
Andrew Levine
A Bulwark Against the Idiocy of Conservatives Like Brett Kavanaugh
T.J. Coles
Neil deGrasse Tyson: A Celebrity Salesman for the Military-Industrial-Complex
Jeff Ballinger
Nike and Colin Kaepernick: Fronting the Bigots’ Team
David Rosen
Why Stop at Roe? How “Settled Law” Can be Overturned
Gary Olson
Pope Francis and the Battle Over Cultural Terrain
Nick Pemberton
Donald The Victim: A Product of Post-9/11 America
Ramzy Baroud
The Veiled Danger of the ‘Dead’ Oslo Accords
Kevin Martin
U.S. Support for the Bombing of Yemen to Continue
Robert Fisk
A Murder in Aleppo
Robert Hunziker
The Elite World Order in Jitters
Ben Dangl
After 9/11: The Staggering Economic and Human Cost of the War on Terror
Charles Pierson
Invade The Hague! Bolton vs. the ICC
Robert Fantina
Trump and Palestine
Daniel Warner
Hubris on and Off the Court
John Kendall Hawkins
Boning Up on Eternal Recurrence, Kubrick-style: “2001,” Revisited
Haydar Khan
Set Theory of the Left
FacebookTwitterGoogle+RedditEmail