A Wittenberg University economics professor told members of the Springfield Rotary Club this week that disputes over the trade deficit between the United States and China could cause collateral damage across the world because economies of both nations are so closely tied together.
The U.S. and China are swapping tariffs in an ongoing trade dispute. President Donald Trump has cited the trade deficit with China as evidence that U.S. trade policy is broken and the country is losing economic ground to competitors.
Rachel Wilson, an associate professor of business and economics at Wittenberg University, told the Rotary members that trade deficits are more complicated and do far more than appear to create winners and losers.
“We’re not isolated nations anymore,” Wilson said.
The U.S. goods and services trade deficit with China was $335.4 billion in 2017, according to information from the Office of the U.S. Trade Representative. Exports were $187.5 billion, while imports were $522.9 billion. Because the U.S. imported more than it exported, that creates a deficit.
Andrew Kidd, an economist with the Buckeye Institute, a conservative think tank based in Columbus, said one positive side of Trump’s focus on trade is it has brought attention to U.S. trade policies that might not have occurred otherwise. But he cautioned the trade dispute could cause harm to Ohioans if a resolution isn’t reached.
He pointed to the steel tariffs placed on shipments of steel and aluminum from countries like Canada and the European Union earlier this spring. Those tariffs have generally benefited the steel industry in the U.S., Kidd said, but it’s also meant higher costs for businesses in other sectors that use steel products.
“Really it’s helping a specific industry and only a few businesses and it’s its not helping business as a whole,” Kidd said.
Wilson defined the trade balance as the difference between the value of exports from one country to another and the value of imports in return. The balance itself is not necessarily either good or bad, but its impact depends on several issues.
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The trade deficit isn’t new and it’s a complicated picture, Wilson said. The U.S. started running perpetual deficits in the 1980s. While she acknowledged trade agreements have harmed some sections of the economy, she said the net result of open trade has been beneficial to the majority of U.S. workers.
“If trade is good at the individual level, it’s good at the national level as well,” Wilson said.