How did the US get into such a bad trade deal with China?

With the tension between China and the United States, it’s easy to forget that the two countries have been top trading partners for years. Less than five years ago, China overthrew Canada as the United States’ largest and most lucrative trading partner.

Totaling nearly $500b in total goods traded, and making up nearly 15% of the total U.S. trading market. Despite the recent rise in prevalence of China into U.S. trade, the United States has always been the top trading partner for China since the 90s. Although trade relations between the two economic powerhouses has not always been smooth, things dramatically changed recently and within the past years, the U.S. entered a pretty bad trade deal with China. Here’s what you need to know about it:

In 2017 the U.S. and China reached a strategically structured trade deal that opened the market to credit and debtor agencies and credit card companies. The deal also has lifted the ban on beef imports from China to the United States and allows the U.S. to accept shipments of natural gas in their liquified. In return, the Chinese banks are permitted to enter the U.S. market. The hopes with this new deal were to reduce China’s surplus of trade with the U.S. by last year.

These results seem to be an indication that President Donald Trump was open to being less confrontational with China and the U.S. trade market deals. Last year, around the time of the deal, Trump threatened to call China as manipulators of world currency and impose unreasonable tariffs on goods, making foreign trade with the U.S. non-profitable for the Chinese markets. It appeared last year that Trump had softened his approach.

This is no longer the case with a trade war now imminent between two of the largest markets imposing taxes and tariffs on one another which is only worsening the effects of the failed trade deals between the two countries. The equalizer may be more simple than we could imagine though.

The self-destructive tit-for-tat tariff and tax escalation is in neither country’s best interests. The current tariffing system is only hardening positions rather than producing any meaningful results to the world market. Ultimately, the taxes make American producers less competitive and the side effects fall almost exclusively on the consumers.

Stopping this tit-for-tat escalation is the most beneficial way to equalize the trade hardships. By putting these trade war policies in the rearview mirror, the U.S and China could focus on long-term goals and results and work toward a better and more lucrative deal between the two markets.

China could effectively neutralize disagreements by opening up in sectors such as financial services and technology. By doing so, the country would be able to take unilateral steps that would benefit the economy domestically and also be welcomed by Americans and American leaders. The two economic powerhouses can’t disengage fully, regardless of the actions of either administration.

To equalize the trade deficit the two economies must compete and compliment each other in many different areas. The joint goal, though, must be to eliminate irritants, be open to trusting one another, allow mutually beneficial collaborations. It is also going to be very important that the two countries come to an agreement on the competitive guidelines in areas such as the open internet, data mobility, intellectual property, and open investment.

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