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

2. 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

3. 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

4. Tariff Protection I

5. Tariff Protection II

6. 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

7. Tariffs plus VA Taxes II

8. Tariffs plus VA Taxes III

9. 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

10. China Issues II

11. China Issues III

12. 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

13. China Issues V

14. China Issues VI