China and the United States were negotiating some recent economic policies this week, but those talks mostly appeared to have fallen through without much progress in Sino-American relations.
However, a new announcement indicated that the rice market in China is being opened up to American companies for the first time. China first opened up twenty years ago, namely for Asian suppliers. China is the largest consumer of rice in the world and opening up these markets to American producers should allow them to increase revenues.
China imports about five million tons of rice per year, spending up to $1 billion when doing so. This is more than the United States exports which is approximately three to four million tons per year. Still, the deal with the United States will allow the country to diversify away from Asian producers and have several options for importing the stable food in China.
China was previously able to feed itself with rice, but has experienced challenges in doing so, namely in relation to their rapidly aging population which is not able to produce the rice needed by the population. Further, the quality of the soil is depleted and pollution problems contribute to the inability to feed the population with internally produced rice.
The U.S. President, Donald Trump, and his administration, has made a point of attempting to reduce the trade deficit that exists with China by opening up several different industries that China restricts foreign investment with, as well as manipulating their currency. China’s economy is rapidly expanding and growing and is the second largest economy in the world and is poised to become the largest in the next century, namely as a result to their large population.
Chinese officials will inspect U.S. rice supplies before allowing U.S. exporters to import to their country. This may be the first step to opening up a potentially large market.
Talks with China appear to have broken down over revising the economic policy and opening up China to more trade with the United States. In scheduled talks, Wilbur Ross and Steve Mnuchin broached the topic of opening up China to more United States competition which the Chinese government has balked at.
China is currently protecting many facets of their economy, thereby protecting jobs in their country. The United States currently does not have any tariffs or restrictions on Chinse companies operating in the United States which many individuals have indicated lead to unfair treatment on the part of China.
The United States has been attempting to ease these regulations as well as confront China about currency manipulation that places United States exporters at a disadvantage to the United States. Many are indicating that the United States should implement new tariffs to combat these forms of governmental support.
President Donald Trump has indicated his intention to place a 55% tariff on Chinese goods, though many are attributing this to bluster and think a course of action such as this unlikely. China would likely reply with a tariff of their own which could have a major impact on the world economy. A trade war between the United States and China could potentially push the world economy into a recession and threaten many notable industries that the U.S. has significant exports to China including soybeans, technology, and a wide range of food products.
Wilbur Ross and Steve Mnuchin announced that the talks with China will continue and believe that their differences will be ironed out to the mutual satisfaction and benefit of both China and the United States. While talks will continue, they will do so absence of any concrete results from these discussion, along with much uncertainty about the future of Chinese and American economic relations.
The world’s economic situation is going through a monumental change, according to economists. The wealthy and powerful nations are not as important on the world’s economic stage thanks to China and other Asian countries. But Asia is not the only fly in the economic ointment. Brazil, Mexico, South Africa, and India are also playing a role in the declining importance of wealthy nations on the world’s economic stage. Emerging countries are more important because they can produce products that cost less. Plus, there is a population explosion in emerging markets.
Economic convergence is the result of technological advancements in emerging markets. Technology is playing a major role in the shift of economic power. And according to Northwestern University’s social science Professor, Robert Gordon the U.S. economy is not as productive as was during the years between 1920 and 1970. The United States had productivity growth from 1994 to 2014 thanks to the Internet, but that productivity is ancient history, according to Professor Gordon.
So what is the prognosis for the world’s economy? One thing is sure. Globalization is not breaking down. It is reshaping itself. By the year 2022, economic output in Asia will be the same as the output in the wealthy Western countries. China’s share of the world’s economic output will jump to more than 20 percent, and India’s output could jump by more than 10 percent by 2022.
The other factor that will shift economic power to emerging markets in Asia is population growth. The share of the world’s population in the wealthy Western countries went from 27 percent in the 1950s to 15 percent in 2015. China’s share is 19 percent, and India’s share will be more than any other country, by the end of 2025. African countries will also increase their population share over the next five years. Africa’s population share could be more than 20 percent by 2025.
When Donald Trump was flying around the country giving speeches to promote his candidacy for president, he was quick to call China a currency manipulator. And he didn’t mince words when he said he would impose sanctions on China. Both of those brash statements are just thunder at this point and there’s no sanction rain in sight.
The Chinese president is getting a lot of compliments from Mr. Trump. Plus, Trump’s Commerce Secretary, Wilbur Ross, and his Treasury Secretary, Steven Mnuchin, recently met with Chinese officials and it was a cordial meeting. Some Washington insiders say Trump is trying to play nice so China can keep North Korea under control.
But the shaky bromance between the U.S. and China is slowly deteriorating. China won’t or can’t keep North Korea from making threats. Plus, the reopening of beef exports to China is not enough to balance the trade deficit with China. The trade deficit keeps getting larger on Trump’s watch. China exports $360 billion more good to the U.S. than the U.S. exports to China.
The friction between the two largest economies on the planet is increasing every day. The South China Sea, as well as the trade deficit, and the North Korean issue will force Trump to get into true Trump mode before 2017 ends, according to some state officials. But the Chinese know it is only a matter of time before Trump tries to balance trade. He also wants to stop China from manipulating their currency in order to make Chinese products less expensive on the world market.
The Chinese economy is growing twice as fast as the U.S. economy, and if Trump puts sanctions on Chinese imports, consumers will pay the price, and U.S. economic output will suffer, according to some economist. Most economists think Trump will make a move against China after the Russian debacle goes away, and he gets his healthcare agenda and his budget on the right track.