Trade War Part 1. Overview & China

Transcription

1 0 Trade War Part 1 Overview & China

2 By: Chuck Vollmer & Rick Amato

3 U.S. International Trade Since WWII 2

4 U.S. International Trade Since

5 4 U.S. International Trade In 2017 Top 5 Trading Partners Exports & Imports % of Grand Total Trade Top 5 Trade Deficits by Country Trade Deficit % of Grand Total Deficit China $635 16% China $375 47% Canada $582 15% Mexico $71 9% Mexico $558 14% Japan $69 9% Japan $204 5% Germany $64 8% Germany $172 4% Vietnam $38 5% Top 5 Total $2,150 55% Top 5 Total $617 78% All Others $1,738 45% All Others $179 22% Grand Total $3,888 Grand Total $796 $3.9 Trillion $0.8 Trillion

6 U.S. Goods Trade With China $375B 2018 $389B* $ Billions Trade Deficit $4.7 Trillion WTO Entry GDP Parity With USA * Trade deficit was $14B higher than January - May

7 U.S. Goods Trade With China 6

8 7 450 China Per Capita Income $ Billions Wages Increased 26-Fold GDP PPP $375B

9 8 Trade War Part 2 European Union

10 By: Chuck Vollmer & Rick Amato

11 U.S. Trade Deficit Last 4-Decades 10

12 Balance Of Trade Goods $Billions Consumer Goods ($404) Automotive ($201) Capital Goods ($107) Industrial Supplies ($43) Other Goods ($35) Foods, Feeds, & Beverages ($5) Services Financial Services $81 Charges for Intellectual Property $77 Travel $76 Other Business Services $50 Maintenance Repair Services $18 Telecom, Computer, Info Services $2 Government Goods and Services ($3) Transport ($13) Insurance Services ($33) Total Deficit ($572)

13 12 U.S. Goods Trade With European Union $ Billions Trade Deficit $2.0 Trillion EU 1993 * Trade deficit was $8.5B higher than January - May $160B* $151B

14 13 Total Trade With Leading EU Nations 2017 $ Billions Exports Imports Total Trade Deficit Surplus % of Total Germany $54 $118 $171 -$64-37% United Kingdom $56 $53 $109 $3 3% France $34 $49 $82 -$15-19% Italy $18 $50 $68 -$32-46% Netherlands $42 $18 $59 $24 40% Switzerland $22 $36 $58 -$14-25% Ireland $11 $49 $60 -$38-64% Belgium $30 $15 $45 $15 33% Spain $11 $16 $27 -$5-17%

15 14 U.S. Goods Trade With Germany $ Billions $80 $70 $60 $50 $40 $30 $20 $10 $- Trade Deficit $1.1 Trillion * Trade deficit was $3.0B higher than January - May $67B* $64B Recession End

16 U.S. Goods Trade With Germany 15

17 16 Trade War Part 3 NAFTA and Other Leading Nations

18 By: Chuck Vollmer & Rick Amato

19 U.S. Goods Trade With NAFTA 18

20 19 U.S. Goods Trade With Mexico $ Billions $80 $70 $60 $50 $40 $30 $20 $10 $0 -$10 Trade Deficit $1.1 Trillion NAFTA * Trade deficit was $0.49B higher than January - May $71.5B* $71B

21 U.S. Goods Trade With Mexico 20

22 21 U.S. Goods Trade With Canada $ Billions $90 $80 $70 $60 $50 $40 $30 $20 $10 $- Trade Deficit $1.1 Trillion NAFTA * Trade deficit was $3.7B lower than January - May 2017 $17B 2018 $13B*

23 U.S. Goods Trade With Canada 22

24 23 U.S. Goods Trade With Japan $ Billions $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $- * Trade deficit was $0.95B higher than January - May 2017 Trade Deficit $2.1 Trillion 2018 $70B* $69B

25 U.S. Goods Trade With Japan 24

26 U.S. Goods Trade With Vietnam 2018 * Trade deficit was $39B* $0.25B higher than January - May 2017 $38B $ Billions Trade Deficit $0.24 Trillion

27 U.S. Goods Trade With Vietnam 26

28 27 U.S. Goods Trade With Russia $ Billions Trade Deficit $0.23 Trillion * Trade deficit was $0.23B higher than January - May $26B Crimea Annexation $10B 2018 $11B* 0-5

29 U.S. Goods Trade With Russia 28

30 29 Trade War Part 4 U.S.-China Trade/Cold War?

31 U.S.-China Trade/Cold War? 30

32 31 $ Billions U.S. Goods Trade With China Trade Deficit $4.7 Trillion WTO Entry GDP Parity With USA $375B 2018 $389B Est Fold Wage Increase

33 32 Tariffs, Quotas, Barriers China has extensive tariffs, quotas and barrier on U.S. goods. U.S exports to China was $130B (mainly hi-tech) versus $506B imports (mainly finished consumer goods). Trump Administration threatens tariffs on all $506B. Major risks/rewards: U.S. job losses: near-term up to -700,000, long term up to +5,720,000 (assuming $100K per worker on $572B deficit) Stock Markets: U.S. markets flat. China markets down 16%. Inflation: higher costs (esp. consumer electronics autos). Global Growth: slow and maybe recessionary. China responsible for 47% of U.S. trade deficits.

34 33 Intellectual Property (IP) Theft Co-Chairs: Jon Huntsman, Adm. Dennis Blair IP theft (cyber, counterfeits, software piracy and trade secrets theft) costs the American economy as much as $600 billion a year. China responsible for 50% of total IP and 87% of imported counterfeit goods to the USA. China responsible for 50% of U.S. IP theft.

35 34 Chinese Investment Priorities China Investment Corporation $1 Trillion Sovereign Wealth Fund 2018 One Belt One Road Initiative Digital Economy (500M Rural Poor) Energy Economy Banking Economic hegemony

36 35 Foreign Investment Risk Review Modernization Act (FIRRMA) FIRRMA expands the jurisdiction of the Committee on Foreign Investment of the U.S. (CFIUS) beyond its current focus on inbound foreign investment to include outbound foreign investment, particularly when joint ventures result in U.S. companies sharing national security-sensitive technology with their foreign partners, with emphasis on China.

37 36 FIRRMA Expanded Jurisdiction Bankruptcy and Distressed Debt Real Estate (national security-sensitive installations) Transactions Involving Critical Technology (start-up and breakthrough technologies) Transactions Involving Critical Infrastructure (including non-controlling passive investments and large class of foreign-backed projects)

38 37 FIRRMA Expanded Jurisdiction (Cont.) Sensitive Personal Data (concern over Chinese and Russian cyber hacks of government, corporate and personal data) Change in Rights (control or influence where the foreign person already has an investment stake) Transactions Intended to Evade CFIUS Review (e.g., complex investment vehicles)

39 38 Conclusion U.S.-China Trade War? Probably not. U.S.-China Cold War? Already started.

40 39 Free Trade versus Reciprocal Trade After WWII, when the US had 50% of the world s GDP, we had a moral obligation to be charitable and help rebuild Europe and Asia. Considering our nascent recovery from the economic crisis, shifting geopolitics, and the magnitude of U.S. debt, Americans can no longer afford to be economically naïve and have a reason to be cautious.

41 40 Reciprocity Jobenomics recommends a policy of reciprocity a policy in commercial dealings between countries that is based on mutual giving and receiving. The relationship between the U.S. and countries like Canada, Britain, and Australia would be rooted in free trade. The relationship between countries overly protectionist would be based on reciprocal measures, until that country amended its arbitrary practices.