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A Long-Term View on U.S. Trade with China

China Trade

Just hours after President Trump warned China not to retaliate against the U.S.’s latest tariff hike on Twitter, the Chinese Ministry of Finance did just that by raising the tariffs on thousands of American products worth roughly $60 billion in annual imports. Going into effect on June 1, the Chinese tariff hike is a direct response to the Trump administration’s decision to raise the tariff rate on $200 billion worth of imports from China from 10 to 25 percent on Friday, just hours after trade talks between the two countries had broken down. 

“China’s tariff move is in response to the U.S. unilateralism and trade protectionism,” the Chinese said in statement issued on Monday. “China hopes that the U.S. will return to the right track of bilateral trade talks, work together with China and meet each other halfway, to reach a win-win and mutually beneficial agreement on the basis of mutual respect." 

The U.S. is expected to respond to the Chinese announcement by levying an additional 25 percent on all remaining imports from China, marking another escalation in the trade war that has been dragging on for more than a year now. Trump has repeatedly voiced his discontent with the trade imbalance between the world’s two largest economies, stating that the U.S. is being ripped off and losing hundreds of billions of dollars on Chinese trade every year. And while the U.S. trade deficit with China did in fact reach a record high of $419 billion in 2018, that money is neither lost nor is the large trade deficit necessarily a bad thing for the United States. In fact, the latest increase in the deficit is a sign of strength, as a strong U.S. economy and a strong dollar boost demand for Chinese goods in the U.S.

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