Some trade talk on exports and GDP

Answers to the Friday quiz on exports as a % of GDP in the US, Germany and China: World Bank says: 12%, 47%, 20%. Our guesses were 10%, 50%, 25% – so not too bad.

(BTW, It’s all even more complicated if you care to look: gross exports, net, etc. Let’s look at “trade” as % GDP: USA 27%, Germany 87%, China 38%. Finally, note that most US exports go to Canada and Mexico. Bonus: you can make the calculations much more complicated if you like.)

So to get back to the point, in a $20 trillion US economy, the US exports $100 billion in food and goods to China, and China exports over $500 billion to the US. Obviously China’s exports to the US are much more important to their economy.

Thus, fiddling with tariffs on $500 billion in a $20 trillion economy to get some fairer arrangements is no big deal. The correct response to the story is a brief yawn. No wait, it’s another global crisis created by a madman! Once again, the media have shown they can’t do arithmetic, which won’t improve under new SAT rules.

(Oh yes, we haven’t even mentioned the Huawei story.)

One Response to “Some trade talk on exports and GDP”

  1. feeblemind Says:

    China Has Already Lost the Trade War

    From the article:
    As this writer noted in The National Interest, the basic structural political differences between the United States and China seem to make a trade conflict inevitable. China views commercial relations with other countries as an extension of the political conflict between Western democracies and itself—that is, an extension of war.

    . . . It should be apparent that a tariff is a regressive tax and that increased taxes lower household income available for other expenditures. Whether Americans can find substitutes for Chinese goods such as shoes will determine the ultimate impact on prices and spending.

    “U.S. retail sales unexpectedly fell in April as households cut back on purchases of motor vehicles and a range of other goods, pointing to a slowdown in economic growth after a temporary boost from exports and inventories in the first quarter,” Reuters reports. Is this an indication of the “drag” on growth that is caused by taxing things like imports? In classical economic terms, the answer is a resounding yes.

    . . .The truth is that China really has very few options to retaliate against the trade sanctions imposed by the Trump administration. Outside of the traditional approach of a currency devaluation, there does not seem to be any way for it to make up for lost exports to the United States. Yet a devaluation of the yuan would also bring with it the danger of a debt crisis affecting heavily indebted public and private borrowers in China.

    “China needs the U.S. surplus more than the U.S. needs China’s trade and finances,” notes Spanish author and economist Daniel Lacalle. “And that is why the trade war will not happen. Because China has already lost it. China cannot win a trade war with high debt, capital controls and U.S. exports’ dependence. A massive Yuan devaluation and domino defaults would cripple the economy.”

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