NEW GLOBAL ECONOMIC SYSTEM PAINS
The
United States exports
to China are $130 billion while China's exports to the United States are $505
billion a year. $505 billion is about 5 percent of the Chinese economy[1]. So
could the trade wars be the last exit before the bridge for the global economic
leadership?
According
to Gartner's 2018 report; In the global market, the business market of AI
(Artificial intelligence), is estimated to be $ 1.2 trillion by 2018 (increased
by %70 compared to 2017).
Business areas, developing with AI are
expected to be 3.9 trillion dollars in 2022 and add a value of more than 15
trillion dollars by 2030. So probably here is the coming road separation for
America. The reason of the current imbalance of foreign trade with China is, China’s
strategy of becoming a leader in technological-oriented market, especially in
artificial intelligence in 2030.
By 2030, if we will go like the last 10 years, China's economic power may probably shake
America's global economic leadership and the dollar may probably lose its
reserve currency priority…
If it is taken into account that the economic gain of the US is the reserve currency
of dollar, for not to lose this situation, it is possible that the US seek a
way out in the name of political, trade or more clearly global leader existence
war.
This year the American military defense budget has exceeded $700 billion[5]. This can be also an indicator of US global economic leadership existence war supporting by increasing its military deterrence. If you still think that, China's economy is related to its muscle power, think again. Because China’s economic competition is beyond its muscle power now!
FOXCONN company, founded in 1974 in China which produces phones today, and Huawei, is another Chinese company, have a total of more than 160,000 patents today. In additional to this, over the next year and a half, China's annual patent application count is expected to surpass the Americans
What precautions may US take about China?
Perhaps the human rights and the hard working conditions in China, which was ignored previously, can now be put forward as an argument for new sanctions on China. On the other hand, for the sake of economical excellence the US have already applied additional taxes on China.
It is obvious that both the US and China will be economically affected by the levied tariffs. But the United States has less to lose since its exports to China are $130 billion while China's exports to the United States are $505 billion Further, $505 billion in potentially lost exports is a much larger slice of the Chinese economy (about 5 percent) than $130 billion is for the United States (about 0.7 percent)[1].
Additionally, the US has selected relatively high-technology items, such as aircraft tires, lithium batteries, and etc. for the increased levied tariffs to China. Advanced technology products such as smart phones or monitors are not included in this list! It may be undesirable to confront a very large group of consumers who will protest high prices.
For tit-for-tat strategy, you can ask the following question; Did China increase the levied tariffs for US export items also? The answer is, yes with two differences.
First the Chinese have targeted lower-technology and consumer goods. So the suppliers in China can supply them from other countries like Australia. Secondly, the tariffs levied by China are lower, typically 15 percent, compared to the U.S. tariffs of 25 percent, so the impact on importers will be easier to bear.
Perhaps the human rights and the hard working conditions in China, which was ignored previously, can now be put forward as an argument for new sanctions on China. On the other hand, for the sake of economical excellence the US have already applied additional taxes on China.
It is obvious that both the US and China will be economically affected by the levied tariffs. But the United States has less to lose since its exports to China are $130 billion while China's exports to the United States are $505 billion Further, $505 billion in potentially lost exports is a much larger slice of the Chinese economy (about 5 percent) than $130 billion is for the United States (about 0.7 percent)[1].
Additionally, the US has selected relatively high-technology items, such as aircraft tires, lithium batteries, and etc. for the increased levied tariffs to China. Advanced technology products such as smart phones or monitors are not included in this list! It may be undesirable to confront a very large group of consumers who will protest high prices.
For tit-for-tat strategy, you can ask the following question; Did China increase the levied tariffs for US export items also? The answer is, yes with two differences.
First the Chinese have targeted lower-technology and consumer goods. So the suppliers in China can supply them from other countries like Australia. Secondly, the tariffs levied by China are lower, typically 15 percent, compared to the U.S. tariffs of 25 percent, so the impact on importers will be easier to bear.
On the other hand, it is harder for the US companies to supply relatively technological items from other countries especially with in the same price range with China. Another question is, how will American brands which have factories in China be affected by this situation in the future? Or, what if China decides to apply additional taxes to consumer products such as food, textiles, clothing? These topics can be different research subjects.
Last week, Turkey left behind a drop exchange record compared to other countries (especially in dollar currency) for Turkish Lira. Immediately after, the United States announced that the levied tariffs for Turkey exports of steel and aluminum increased. These kind of issues may possibly be a precursor as ‘’the existence war‘’ of US economic global leadership.
Taking part in this competition by Turkey depends on, the value-added production supported by highly educated young population and entrepreneurship.
ISIN
ERENOGLU USTUNDAG
for the Turkish version has been published by N Newspaper:
http://www.ngazete.com/yeni-kuresel-ekonomik-duzen-sancilari-138yy.htm
http://www.ngazete.com/yeni-kuresel-ekonomik-duzen-sancilari-138yy.htm
Refs:
[5] https://www.military.com/militaryadvantage/2017/09/the-2018-military-budget-whats-really-in-it
