International Trade Report: US-China Trade Deficit and Economic Impact

This report examines the evolving dynamics of international trade, focusing on the economic relationship between the United States and China. It highlights the significant and growing trade deficit between the two countries, which has placed pressure on the US economy. The report delves into the reasons behind this imbalance, including China's vast labor pool and manufacturing capabilities, which lead to lower production costs and increased global competition. Furthermore, it explores how China's economic power impacts the US, including unfair trade practices and the dependence on cheaper goods. The report also discusses the US government's response through trade restrictions and tariffs, aligning with mercantilist principles to protect the US economy. It concludes by acknowledging the potential consequences of China's economic growth for the US and suggests protectionist measures as a means to manage these challenges. References include sources from Gov.cn, Usa.gov and academic research papers.

Running head: INTERNATIONAL TRADE
International Trade
Name of the Student
Name of the University
Author note

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Table of Contents
Discussion........................................................................................................................................2
References........................................................................................................................................4

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Discussion
The economy of China has registered a robust growth trajectory for the last several years
and it has emerged as second largest economy of the world. The emergence of China as a global
economic super power brings both positive and negative impacts for the world economy. In
recent years, the trade deficit between the United States (US) and China have increased
dramatically, which created pressure on the US economy. As of 2019, the trade deficit of the US
with the China stood at 345.6 billion US dollars (Usa.gov, 2020). The total imports of the US
from China remained higher than the total exports of the US to China. Thus, the growing
economic power of the China may act against the US economy. Two main reasons that may
hinder the growth of the US economy.
As China retains a vast pool of labour resource, it continued to grow as a major
manufacturers of the world (Gov.cn, 2020). It generates huge amount of revenue by exporting
those products and results in expansion in trade and business. The cheap labour resource helps to
produce goods at a cheaper cost, which creates higher competition among other countries. Thus,
it would hamper the growth of the US economy. It adversely impacts the world market by
increasing price of the minerals and oil through insatiable demand of the China. The unfair trade
practices by the China restrain the US from protecting the intellectual property rights, which
aggravates the problems of the US in trade and business (Zhang et al., 2019). Another reason that
widens the trade gap between two major economies include dependence on the manufacturing
giant because of low cost products. The immense economic power of the China compelled other
countries including US to import cheaper goods from the China. As a result, it widens the trade
gap and aggravates the economic turmoil within the country.

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Therefore, the availability of the human capital and cheap labour scaled up the problem
of the US economy. In order to protect the US economy, the government imposed some trade
restrictions in terms of tariffs on the goods imported from China, which escalated trade war
between two biggest economic of the world. Thus, it relates to the mercantilist assumption,
where export is maximized and import is minimized (Manger & Sattler, 2016). The main
objective of this national policy is to reduce the current account deficit of a country to achieve a
current account surplus. Here, to control the global economic power of the Chinese economy, the
US economy led by the Trump administration adopted the national economic policy related to
mercantilism. It would support the accumulation of the monetary reserves through the surplus of
balance of trade. It would also negate the emergence of the Chinese economy as a global
economic super power. Therefore, the rapid strong economic growth may bring various other
consequences for the US economy, which can be corrected with the help of protectionist
measures. It would also control the transfer of technology to the Chinese companies and stop
them from gaining access in the market.

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References
Gov.cn (2020). The State Council of the People's Republic of China. English.gov.cn. Retrieved
14 March 2020, from http://english.www.gov.cn/
Manger, M., & Sattler, T. (2016). Mercantilism in a Liberal World Order: The Origins of
Persistent Current Account Imbalances. Manuscript, University of Toronto and
University of Geneva. Available from https://ssrn. com/abstract, 2523954.
Usa.gov (2020). Official Guide to Government Information and Services | USAGov. . Retrieved
14 March 2020, from https://www.usa.gov/
Zhang, D., Lei, L., Ji, Q., & Kutan, A. M. (2019). Economic policy uncertainty in the US and
China and their impact on the global markets. Economic Modelling, 79, 47-56.