Solving the Trade Imbalance

Forums: China Trade, Us Productivity, Global Trade, Trade Imbalance
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A top headline today quotes Trump as telling China to 'act now' to avoid worse problems later.

But what would it mean for China to 'act now' exactly? Trump is concerned about trade imbalance. In other words, he wants to put US people to work by Chinese demand in the same way Chinese people are put to work by US demand.

This is difficult because of various reasons, but it poses the question of whether and how more US production could serve global demand. Part of the problem is that the US cost of living is higher than elsewhere, and that drives up labor costs and other production costs.

So the solution is to simply lower the cost of living in the US, right? That could be simpler if there weren't investment interests that would make less money as the US cost of living would decrease. In other words, the US has trouble being competitive because it is a lucrative demand market for global investment.

China could help remedy this by investing in more price-competitive and efficient businesses in the US, but would they be able to succeed, given that there is much social-cultural resistance to such cost-cutting in the US, i.e. because of a culture that associates higher prices and costs with status instead of affordability and efficiency.

So the challenge may be social-cultural more than just economic. And then are the Chinese industries and other global businesses/investors who have an interest in keeping US consumer spending high to boost their own revenues going to want to invest in making the US more competitive as an economy with more production facilities? There would seem to be a conflict of interest there that is hard to resolve.

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If you want to solve business problems, you first need to learn the business.

"Trade imbalance" is not a problem. You have a terrific trade imbalance with the grocery store: you give them worthless paper with pictures of dead presidents and they give you food, and neither side considers that a problem.

Trump's sanctions against China have driven up the cost of running a dairy farm. The result is that many dairy farms in Wisconsin have been forced into some other business to stay afloat. Americans are forced to buy smaller vehicles because of the increased costs of steel and aluminum, and Mexico has banned American cheese in sympathy to the Chinese.
https://fee.org/articles/trump-s-trade-war-is-crushing-dairy-farmers/

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@livinglava,

1. I agree with you that lowering the cost of living would decrease the trade deficit.

2. I agree with Jewels Verne that the Trade Deficit is not a big problem by itself, nor is it indicative of any economic problem. We can have a perfectly good economy with low unemployment and a big trad deficit.

3. Lowering the cost of living means lowering salaries. This is the problem with your plan... I don't want a lower salary.

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@maxdancona,

maxdancona wrote:

3. Lowering the cost of living means lowering salaries. This is the problem with your plan... I don't want a lower salary.

Then don't accept job offers at wages below your threshold.

Why do you have to prevent others from taking lower wage jobs and spending less by foregoing expensive non-necessities that drive up their cost of living, such as car ownership?

It is socialism to obstruct public transit developments and anti-sprawl initiatives to force everyone to keep buying/insuring/repairing cars.

Many Chinese workers can afford to work for less because they have good public transit, affordable housing, etc. Why should US people be denied the same opportunities because some other people, like you, want to force them into a higher cost of living to exploit them for more money?

If they want to save up and buy something expensive that pays your high salary, that's up to them. If they want to save money to keep their living expenses low so they have more options for what to do as paid work, that choice should be available.

Wouldn't the economy be better off in general if the US could produce affordable goods for export as well as domestic consumption? Why are people who want more money so afraid of lowering prices and wages as a 'race to the bottom?' Why can't they/you see that if US consumers benefit from trading with low-wage industries in China, we can benefit as much or more from having similar low-wage industries domestically?

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@livinglava,

You running afoul of mathematics and of basic reality. You can't have low prices and high salaries.

If I get a $5 haircut... The haircutter will make less than $5.

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@maxdancona,

maxdancona wrote:

You running afoul of mathematics and of basic reality. You can't have low prices and high salaries.

If I get a $5 haircut... The haircutter will make less than $5.

Not if the hair cutter meets you somewhere they don't have to pay rent, or a manager, to cut your hair.

Efficiency is how we produce enough for everyone, with less time-demand.

If you want to do things more inefficiently to take more time to do it, the only way you can get more money is by forcing people to pay more for it.

That is a losing proposition. Democrats/socialists/unions are always trying to force more money out of the rich to pay people for spending more time working, but what good is that?

Why not just live efficiently and have more free time? And what do you think it does to the environment to work so inefficiently? How can the Dems be for climate/environmental reforms/restoration if they refuse to use the economy more efficiently to waste less resources and land?

Look, there will always be people who make more money, but the problem is that minimum wage blocks many people from having more opportunities because they and the businesses that would hire them can't compete with cheap Chinese labor.

Why not solve the trade imbalance by getting the cost of living down so that businesses and workers can afford to work for less, and then we can fully participate in the global economy instead of just being a cash-cow for other countries to sell their products and cash in on our uncontrollable spending and debt?

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