What If America & China Stopped Trading?
America and China may have a slightly tense history, but the pair are two of the biggest
trading partners in the world.
How much do they really need each other?
Hello and welcome back to Life’s Biggest Questions, I am Rebecca Felgate and today
I am asking What if the worlds two biggest economies, America and China Stopped trading?
Economics are hard to wrap your head around, so I am going to try and keep this video simple.
Currently the Unites States has the biggest economy in the world, with a Gross Domestic
of 18.57 trillion, whereas China is a close second at 11.2 trillion.
Economics experts predict that China will be on par with the states by the year 2022,
after which it will begin to overtake the States as the biggest economy in the world.
Both the Chinese and American Governments benefit from trading with one another, yet
both charge high Tariffs.
United States President, Donald Trump, made trade with China a key part of his campaign.
Despite outsourcing production of his clothing collection to China, Trump focused on downplaying
internationally made goods, instead promoting US made goods, which is all very well in theory.
The past 40 years have been big for China.
The country has lifted itself from poverty to reasonable affluence by changing its previously
closed economy that focused on agriculture to a partially open economy, focused on manufacturing
and exporting.
Along with that change, the mood in the country has changed; Chinese people want American
Products.
If they stopped trading, they’d lose Apple., Starbucks, Tiffany, General Motors, Ford,
Nike , Microsoft, Intel, Coca Cola, Mcdonalds and Yum!, owners of KFC.
These American companies make a lot of money in China and their businesses would suffer.
In fact, without American exports in China, the US would be worse off to the tune of 250
billion dollars.
On the flip side, Chinese brands aren’t as well known in the USA but America is buying
a lot of Chinese products in the form of technological parts, appliances and apparel, with companies
outsourcing manufacturing to China.
In 2016, China was the Unites States largest supplier of goods imports, to the tune of
$462.8 Billion dollars.
In terms of the figures, we can see that China sells the US more than the US Sells to China.
In a trade war, or total trade embargo countries with highest surplus get hit hardest.
A lack of trade between the two countries would have a hugely damaging impact on both
countries, but in the short term, no doubt China would suffer the most.
That being said, unlike 40 years ago, China now has the technology to make competing products
on a bigger scale than the US.
Some are calling Huawei the next apple, and the telecoms company has grown 125% in the
past 10 years.
American companies would suffer, as would American consumers.
The American tech industry is reliant in china, with Capital Economics saying that China produces
three quarters of mobile phones, and 93 percent of all laptops and tablets.
Companies that rely heavily on Chinese imports include Apple, Microsoft and Walmart.
Without cheap labour creating cheap parts, products from these retailers would become
much more expensive for consumers, lowering the standard of living in the States, at least
for the short term, until the States found a new trading partner or found a way to fill
the void with products manufactured in the US, although American Labour will still drive
prices higher.
Some think an end to trade with China would mean that more jobs are created in the US,
which could be the case, but not in the short term.
The economic decline suffered by the states at the lack of trade with China would likely
put people out of work in China dependent, or run businesses.
On top of that, low skill manufacturing jobs are unlikely to ever make a return to America
because the cost is too great.
Some factory jobs have already been replaced by machines, and the rest would likely be
outsourced to a second or third world country.
On the flip side though, higher skilled technical jobs may return.
Aside from the economic decline on both sides, a lack of trade with America could greatly
shake up Chinese politics.
Right now, Chinese economic growth is one of the reasons the people still support a
communist government, however if the country were to fall into economic decline, there
could be political upheaval.
Politics and economics are tricky topics to cover in a short space of time, with both
being complicated issues.
Ultimately, both China and America would lose a lot of money if they stopped trading with
one another, with prices of consumer products rising to unreasonable levels for United States
Citizens.
In China, the immediate economic suffering would be worse, and it could have far reaching
political consequences.
In the long run, though, China is more readily poised for recovery than the United States.
All in all, though, a trade embargo at this point in time would be pointless and damaging
for both nations.
That’s all we have in today’s episode of Life’s Biggest Questions, If you guys
have any further thoughts on the topic, let me know in the comments box below.
For now, I am Rebecca Felgate, be sure to stay curious, stay alert and never ever stop
questioning.
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