Current Events China What actions will Donald Trump take to attempt to "fix" trade relations with China and how will it affect trade relations between the two countries?

With the expansion of its trade into the global market, China grew from the 7th largest economy (worth US$305 billion) beginning in 1980, to the second-largest (worth more than US$11 trillion) in 2016. From the time of China’s economic reforms in 1978 to the present, the country has grown at an annual pace of near 10%. China is currently the second-largest economy globally behind the U.S. Also, China is the U.S.’s second-largest trading partner and its third-largest export market. In 2015, China sold US$483 billion in goods to the U.S., an amount more three times greater than US$116 billion the U.S. sold in China. Globally in 2015 China exported US$2.3 trillion and imported US$1.7 trillion, posting a trade surplus of US$600 billion in the period. (Forex Capital Markets)

U.S. trade policy toward China during the eight years of the Obama administration reflected this new tone. Early on, President Obama authorized tariffs on Chinese tires under a special safeguard provision of U.S. law, which President Bush had balked at invoking on three previous occasions. That action prompted a WTO challenge from China (which it lost), as well as a slew of Chinese "retaliatory"? trade remedy actions against U.S. products, including chicken and automobiles. (Retaliatory is in quotes because the measures were ostensibly imposed in compliance with WTO-permitted domestic trade remedy laws, but the haste with which those measures were imposed, and the ultimate finding by the WTO Dispute Settlement Body that China's actions against U.S. chicken ran afoul of its WTO obligations suggest there may have been a tit-for-tat motive at play.) (Ikenson)

In the past few years China has been the US's biggest trade partner. China is continuously in the top of the top exporters of US goods. For example, U.S. goods and services trade with China totaled an estimated $659.4 billion in 2015. Exports were $161.6 billion; imports were an estimated $497.8 billion. The U.S. goods and services trade deficit with China was $336.2 billion in 2015. The US sometimes comes out on the losing end and now owes China a great sum of money which is what President Trump hopes to fix. (Executive Office of the President)

Never have the U.S. and Chinese economies been more interdependent than they are today. Never has the value of the bilateral trade and investment relationship been greater. Never has the precarious state of the global economy required comity between the United States and China more than it does now. Yet, with Donald J. Trump ascending to power on a platform of nationalism and protectionism, never have the stars been so perfectly aligned for the relationship to descend into a devastating trade war. The election of the impetuous Trump, who sees trade as a zero-sum competition between countries that either win or lose, renders restraint temperamentally improbable and strategically illogical. Because the United States runs a large bilateral trade deficit with China, President Trump views Beijing as the more dependent party in the relationship with more to lose from a trade war. Perceiving the consequences of a trade war as relatively benign for the United States makes that course of action a realistic option for Trump. This thinking amounts to a major departure from over 80 years of U.S. trade policy orthodoxy. (Ikenson)

Around the world, concerns are mounting about China's unfair trade and investment practices. How Donald Trump responds could have a far-reaching impact on the global economy and financial markets. He is not alone in sounding the alarm about unfair competition-and a playing field sharply tilted in China's favor. And there are plenty of options on the table if he wants to show he is tougher than his predecessor. The American Chamber of Commerce in China, which usually is very measured in any criticism of China, complained this month about a rise in protectionism and "economic hegemony," with doors closing to foreign investment, regulations biased against foreign companies, and new national security-related laws breeding "distrust and paranoia." "This is not just an American problem". "China has to realize these concerns are real." There is an impending trade war between these two countries. (Deyner)

In his campaign pledges during the 2016 presidential election campaign, Donald Trump made several proposals that would specifically affect trade relations with China. Among these include labeling China as currency manipulator to subject it to possible tariffs and taxes, U.S. withdrawal from the Trans-Pacific Partnership, instructing the U.S. Trade Representative to bring trade cases against China, within the U.S. and at the WTO to challenge China’s alleged unfair subsidies to its industry, and apply tariffs to Chinese goods consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962. (Forex Capital Markets)

In a promise from his campaign, Trump said that he will label China as a currency manipulator to start off his actions. This action is just to show that he wants to change the trade relations that the US has with China now and it doesn't actually change much. He will also attempt to bring trade cases against China to limit the extent of their trade reach. Trump aims to apply tariffs to all Chinese goods to give them less profit and save the US valued money. He also wishes to withdraw the US from the Trans Pacific Partnership, a trade agreement between 12 pacific bordering countries. He says that it will only make China stronger to stay in the TPP. (Forex Capital Markets)

Although China has by far the largest trade surplus with the United States of any country its current account surplus is under 3 percent of gross domestic product, and it has actually been intervening to prop up its currency, not depress its value. In other words, it met only one of the three criteria last year, the Treasury Department reported. "It would be difficult for the new administration to direct the Treasury to say China is a currency manipulator," said Eric Shimp, a policy adviser at Alston & Bird in Washington, and a former U.S. diplomat and trade negotiator. Still, Shimp said, a Trump administration could initiate a broader investigation into China's trade practices and the state subsidies Chinese exporters enjoy. Across-the-board punitive tariffs are unlikely, not least because they would invite likely Chinese retaliation that could bring down entire industries, experts said. But specific measures are possible in specific industries. In Washington last week, Chinese Vice Premier Wang Yang said that problems in the trade relationship could damage the global economic recovery and that cooperation was "the only right choice." (Deyner)

Like most trade-related measures, the implementation of trade-restriction measures against China proposed by Trump would likely have a diffuse impact on stocks. Principally, they could be expected to have an impact on companies doing direct business in and with China. These could include U.S.-based companies such as General Electric, Apple Computer, Nike and Tesla, among others. Similarly, Chinese companies relying on business in the U.S. could also be hurt. This would include companies such as Alibaba, Baidu Inc., Netease and JD.com, among others. All of these companies make up a huge part of the American stock market and could really deal a blow to these very popular companies in the US. (Forex Capital Markets)

The direct impact on currencies of trade policy changes in relation to China should be measured against other factors, including global economic growth patterns, inflation and monetary policy decisions. However, it’s likely any shifts in international trade flows would also produce some changes in currency levels over time. The dollar climbed against a broad range of currencies immediately following Trump’s election win, while China’s renminbi fell to an eight-year low. That trend may be reinforced, should the U.S. opt to implement some of the policies suggested by Trump. The result could be the renminbi staying at the lower end of its range as U.S. trade flows are steered less directly toward China. There is little evidence, however, to suggest that any of the maneuvers suggested by Trump would influence China to alter its currency policy. (Forex Capital Markets)

Trump's policies and his plans to uphold them as well as China's potential retaliation in strength both set upon main ideas of Legalism. Both countries both have leaders who wish for their people to be rewarded if they support their plans to become wealthy or "great again". Trump will likely start this off by placing sanctions on China. By Legalist ideals he must uphold these and reward those who help him follow this. However China would have to show that they are strong too and won't be punished by a power that is not theirs. They will listen to their leader ideally and be able to properly fire back. While both countries will follow this as ideal Legalists in their minds they will be unbalancing global economy as they are two of the wealthiest, most powerful countries are halting trade to deal with each other. This connects to Legalism because both people and businesses in these countries would have ideally followed these laws to a fault and wouldn't be rewarded which would fall on the leaders. As you can see, the question I chose and issues connecting to it embody some principles of Legalism.

There are many more questions that my research has prompted. Most of them focus around the economies of the two countries. For example, now I want to know why Trump thinks his plans will benefit America and not backfire. I want to find out why China will take countermeasures and not be passive, also why their trade is so strong in the first place to binging with. There are so many new viewpoints and ideas that have come to my mind and this project has helped me explore them all.

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