Jack Ma: US-China trade war will kill jobs, opportunities, and hope

by Jack Ma/ April 11, 2018/ SCMP

As a businessman, I have been encouraged by the US administration’s pro-business policies, like lowering corporate taxes. Now, like many in the business community, I am struggling to understand why a trade war with China would be good for the US economy.

The US has a structural trade deficit with China because of the market forces of comparative advantage: economies produce what they are best at making and import other things. Dollars earned from trade surpluses in China have been recycled to finance American borrowing, keeping US interest rates low with favourable economic conditions. American unemployment stood at 4.1 per cent in March, a 17-year low. All these economic indicators suggest that the US economy is doing well, regardless of the trade deficit.

American economic policy for the past 30 years encouraged US companies to outsource labour-intensive manufacturing to China and other Asian countries while retaining the most valuable parts of American ingenuity: innovation, technology and brand.

China embraced this American-led globalisation because it was also the best path for China’s development as an emerging economy. To raise living standards for 1.3 billion people, the Chinese government promoted foreign investment and built the economy on the strength of its large and increasingly skilled labour force. As a result, China became the world’s largest exporter, with a significant trade surplus. American consumers benefited from low prices and American corporations made giant profits.

There’s no better example of a beneficiary of this symbiotic relationship than Apple. The company designs the iPhone and develops proprietary chips and software in California. It makes the units through contractors that hire millions of workers in China, assembling components manufactured in South Korea. Through smart marketing, Apple products capture consumers’ hearts, making its brand more valuable.  Read more…

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