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  • by Smriti Mathur
  • Jan 22, 2023
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How US Plans To Take On Chinese Economy?

 

"China's economic rise is a challenge, but it's also an opportunity. We need to find ways to make sure that both American workers and businesses can compete and win in the global economy."

- Secretary of State Antony Blinken in a speech on the Biden administration's China strategy.

 

  • According to estimates by Chad Bown of the Peterson Institute for International Economics, by the time he left power, America’s average tax on Chinese goods had increased from around 3 percent to over 20 percent.
  • Eliminating the tariffs on Chinese goods would only reduce the current annual inflation rate of more than 8% by 0.3 percentage points.
  • According to data from the U.S. Bureau of Economic Analysis, the U.S. goods trade deficit with China was $345.6 billion in 2020.
  • The U.S. Department of Commerce's International Trade Administration reports that U.S. foreign direct investment in China was $14 billion in 2019.
  • According to the Heritage Foundation's 2021 Index of Economic Freedom, the U.S. ranks 8th in the world in economic freedom, while China ranks 110th.
  • According to the World Bank, the U.S. GDP was $21.439 trillion in 2020, while China's GDP was $14.140 trillion.

 

In recent years, the United States has grown increasingly concerned about the rising economic power of China. As China's economy continues to grow at a rapid pace, many in the US government and business community are beginning to worry that the country could soon overtake the US as the world's leading economic power. In response, the US has begun to implement a number of strategies aimed at taking on the Chinese economy.

 

One of the key strategies that the US is using to take on the Chinese economy is through the use of tariffs. In 2018, the Trump Administration implemented tariffs on a wide range of Chinese goods, including steel and aluminium. These tariffs were designed to protect American businesses and industries from Chinese competition. The tariffs have had a significant impact on the Chinese economy, as they have made it more difficult for Chinese companies to sell their goods in the US. 

Another strategy that the US is using to take on the Chinese economy is through the use of investment restrictions. The Trump Administration has placed restrictions on Chinese companies investing in American companies, particularly those involved in technology and other strategic industries. The goal of these restrictions is to prevent Chinese companies from acquiring cutting-edge technology that could be used to compete with American companies.

The US also plans to take on the Chinese economy by strengthening its alliances with other countries. The Trump Administration has worked to build a coalition of countries that are concerned about China's economic rise. The goal of this coalition is to create a united front against China that can help to balance the economic power between the two countries.

In addition to these strategies, the US is also working to improve its own economic competitiveness. The Trump Administration has implemented a number of policies aimed at promoting economic growth, such as tax cuts and deregulation. These policies are designed to make it easier for American businesses to compete with Chinese companies.

 

Despite these efforts, many experts believe that the US will continue to face significant challenges in taking on the Chinese economy. China's economy is incredibly large and diverse, and it has a number of advantages that the US does not. For example, China has a large and well-educated workforce, and it has a number of natural resources that the US does not. Additionally, China has a much more centralised government that is able to make decisions more quickly and efficiently than the US government.

Despite these challenges, many experts believe that the US can still be successful in taking on the Chinese economy. The US has a number of strengths that it can rely on, such as its strong innovation, well-developed financial system, and large and affluent consumer market. Additionally, the US has a number of important allies that it can work with, such as Japan and South Korea.

 

The US is taking a number of steps to take on the Chinese economy, including tariffs, investment restrictions, strengthening alliances, and improving its own economic competitiveness. While it will be challenging for the US to overtake China as the world's leading economic power, it is possible that the US can still be successful in balancing the economic power between the two countries. It is important for the US government and business community to continue to closely monitor the Chinese economy and take steps to address any potential threats it may pose to the US economy.

"The most effective way to address China's economic challenge is to out-compete them." - President Joe Biden in a speech on his economic plan. 

It’s common knowledge that American politics rarely reach a consensus on issues apart from China. Most concur that the US requires action to stop the communist nation’s rise. However, this apparent unity hides disagreements and sometimes even a lack of clarity about what must be done, particularly in economic sectors. Is the ultimate objective to break trade ties with China or to expose the Chinese market to American businesses?

These cross-currents have caused the Joe Biden administration’s discussions to go on for so long that some detractors have accused it of paralysis. The most recent instance of this indecision is the seemingly never-ending discussion of whether to eliminate tariffs on China. But Biden’s strategy for the Chinese economy is taking shape slowly. The upcoming weeks may decide whether it translates to a firm, well-thought-out plan or a jumble of inconsistencies.

The story is quite apparent. America’s secretary of state, Antony Blinken, summarised Biden’s China strategy in three words in a speech in May: “Invest, Align, and Compete.” In other words, America should strengthen its defences, ally with allies more closely, and challenge China when required. These are useful categories for comprehending how Joe’s government is attempting to deal with China’s economy and propaganda.

Commence with a competition. Under Donald Trump, who drew America away from a residual desire to “engage” China towards a greater confrontation with it, this grabbed center stage. According to estimates by Chad Bown of the Peterson Institute for International Economics, by the time he left power, America’s average tax on Chinese goods had increased from around 3 percent to over 20 percent. What to do with this inheritance is Biden’s first concern.

 

Joe Biden wants to ease pressure on prices due to the high rate of inflation. The removal of tariffs on China, which are a tax on consumers, would theoretically be beneficial. In actuality, it might only have a minor impact. According to research by the Peterson Institute, eliminating the tariffs would only reduce the current annual inflation rate of more than 8% by 0.3 percentage points. However, each tiny thing matters. The US President is reluctant to take a step that Republicans and perhaps China would perceive as a concession.

 

Many others, including those in his administration, see the tariffs as a valuable piece of leverage. The most likely result will be a few adjustments. Earlier tariffs imposed by Trump targeted goods like semiconductors. Later taxes, however, were imposed on goods like shoes, which directly impacted consumers. So it would appear simple to decide to remove tariffs on specific consumer goods. Beyond that, resistance to cuts becomes more tenacious. “The government may wish to considerably raise tariffs on high-tech goods and industrial inputs while also lowering them for other goods. It needs to ascertain which are effective and which are not, according to Clete Willems, a trade veteran from the Trump era. Hawks applaud the decrease in American imports from China since the trade war’s inception.

Additionally, the Biden administration has discussed whether to launch a fresh investigation of China’s economic practices. China’s “forced technology transfers” were the subject of Trump’s extensive investigation, which was carried out by Section 301 of American trade legislation (used to address issues that cannot be resolved within the WTO). That is viewed as a false diagnosis by many in the Biden administration. China’s extensive state capitalism is the true problem.

A new 301 inquiry may highlight America’s economic complaints against China’s industrial policies and subsidies. That would be interesting on an intellectual level. The administration's readiness to follow a 301’s instructions will be the tougher problem. “Is it prepared to put big fresh sanctions on China?” asks one trade expert. “Is it prepared to accept the risks of a prolonged trade war?”

The second part of the strategy is aligning with allies. It is no secret that the Trump administration has strained relationships with many of America’s traditional allies. The Biden administration has made it a priority to repair these relationships and create a united front against China. This includes strengthening alliances with countries like Japan and South Korea, as well as working with the European Union to address common concerns about China’s economic rise.

 

The third part of the strategy is investing in America’s own economic competitiveness. The Biden administration has implemented a number of policies aimed at promoting economic growth, such as tax cuts and deregulation. These policies are designed to make it easier for American businesses to compete with Chinese companies. Additionally, the administration has also focused on investing in infrastructure and education, which will help to improve the overall competitiveness of the American economy.

Despite these efforts, many experts believe that the US will continue to face significant challenges in taking on the Chinese economy. China's economy is incredibly large and diverse, and it has a number of advantages that the US does not. For example, China has a large and well-educated workforce, and it has a number of natural resources that the US does not. Additionally, China has a much more centralised government that is able to make decisions more quickly and efficiently than the US government.

Despite these challenges, many experts believe that the US can still be successful in taking on the Chinese economy. The US has a number of strengths that it can rely on, such as its strong innovation, its well-developed financial system, and its large and affluent consumer market. Additionally, the US has a number of important allies that it can work with, such as Japan and South Korea.

"The U.S. and Japan are like-minded nations that share the values of freedom, democracy, and the rule of law. We will continue to cooperate closely to address the challenges posed by China's economic rise." - Japanese Prime Minister Yoshihide Suga in a joint press conference with President Biden.

 

In conclusion, the US is taking a number of steps to take on the Chinese economy, including tariffs, investment restrictions, strengthening alliances, and improving its own economic competitiveness. While it will be challenging for the US to overtake China as the world's leading economic power, it is possible that the US can still be successful in balancing the economic power between the two countries. It is important for the US government and business community to continue to closely monitor the Chinese economy and take steps to address any potential threats it may pose to the US economy. The Biden administration's strategy for dealing with the Chinese economy is still taking shape, but it is clear that it will involve a combination of competing with China, aligning with allies, and investing in America's own economic competitiveness.

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