NS3040 Fall Term 2017 Trade Walls Keith Bradsher and Karl Russell, Building Trade Walls, New York Times, March 7, 2017

Introduction I President Trump started out with an ambitious idea – remake American trade Considering Sweeping aside decades of policy, and Rethinking how the US looks at trade with each country Essentially after years of criticizing China and much of Europe for the way they handle imports and exports US officials want to copy them Could Result in higher trade barriers to imports End decades long status as the world’s most open large economy

Introduction II On other hand it could Provide a boost to companies who make things in US and Create big problems for countries like China that depend heavily on exports to the U.S. Important to understand how U.S. and other countries currently treat trade Most visible layer is tariffs or taxes on imports World Trade Organization has allowed developing countries to impose far higher tariffs than industrialized countries China has been counted as a developing country

Tariff Protection I

Tariff Protection II

Tariffs plus VA Taxes I Most countries have additional barriers China and most other countries (not U.S.) also have a steep value added tax Similar to a sales tax on imports and home produced goods alike Exports are exempt from value added taxes giving companies an incentive to sell abroad Once value added taxes and sales taxes are included in an international comparison U.S. barriers much lower than just about any other country

Tariffs plus VA Taxes II

Tariffs plus VA Taxes III

China Issues I President Trump, advisers and some lawmakers don’t like this arrangement They question why China’s average tariffs are about three times as high as those in the US Tariffs on manufactured goods which involve a lot of jobs are far higher still. These levels allowed because when China joined the WTO in 2001 it was clearly a developing country Lower American trade barriers have helped China increase exports to the U.S. while importing fairly little. Today, China’s designation as a developing country is more debatable China world’s second largest economy and the biggest producer of steel and cars

China Issues II

China Issues III

China Issues IV Still China trails most developed nations by some measures Chinese officials argue that it is still developing and does not yet qualify as industrialized. China’s economy is still two-thirds size of U.S. even though has four times as many people Average incomes in China still one-fifth to one quarter of levels in U.S. Much of China’s interior is still underdeveloped. When China joined the WTO in 2001 expectation was its tariffs would be lowered during global trade talks the Doha Round Talks fell apart for a variety of reasons

China Issues V

China Issues VI