Republican Presidential Candidate Donald Trump has been vague on many of his policies, but one that remains clear is his policy for China. He has held the nation accountable for violating the World Trade Organization (WTO), devaluing currency, and using the United States as a “piggy bank”. Are these accurate perceptions of the country?
First, let’s look at the Gross Domestic Product and net imports or exports of both nations in the last year. The United States’ Gross Domestic Product (GDP), the total value of goods and services provided, was $18 trillion - roughly 1.6 times China’s GDP of $10.36 trillion. However, China’s GDP grew 6.9% while the United States’ GDP only grew 2.4% in 2015. The US imported $1.89 trillion more than China, but China’s high-technology exports were $413 billion more than those of the US. From this information, we can draw the three conclusions: the US consumes significantly more than China, China’s economy is growing much faster than the United States’ economy, and China exports more technology products than the US.
Donald Trump’s campaign website has a 7-point plan for dealing with China. Notably, the plan calls to instruct the Treasury Secretary to label China a currency manipulator and bring trade cases against China for having allegedly violated the World Trade Organization (WTO). Additionally, Mr. Trump states that our trade deficit (exports less imports) hit $800 billion last year and half of that is attributable to trade with China. His ultimate economic goal is to create a large tariff on Chinese imports to reduce trade with China and bring back manufacturing jobs lost overseas.
Do these ideas indicate that China is taking advantage of the US through trade? This most likely depends on whether China is devaluing their currency and violating the WTO like Mr. Trump alleges. However, even if this were true, it does not signal that trade has caused the U.S. to play second fiddle to China in the world economy. The U.S. consumes more - 7 times more per capita - than China.
The real reason for the differences in growth and shifts in power appears to relate to both country’s respective education levels, and their industrial maturities. China is investing more of its GDP into education and has seen its education levels soar. In China, 86.95 million more people are enrolled in primary/secondary school and 7.03 million more are enrolled as undergraduates than those respectively in the United States. Last, while China is still on the tail-end of its industrialization period, the United States is a post-industrial nation and therefore experiences less rapid economic development.
In a world that is becoming increasingly globalized, jobs in developed nations have shifted from labor-intensive to capital-intensive. Mr. Trump’s idea of bringing back jobs is a noble one, but it might not be the right way to handle the problem. The real problem lies with the sad state of the American education system.