Tilting at windmills

Tilting at windmills

Article:

1. Ravi Arvind Palat, has talked about structural issues associated with USA economy.

Important Analysis:

2. Donald trump has imposed tariff on main trading partner e.g. Canada, China, the European Union, and Mexico.
3. Why USA has imposed:

• Due to industrial structures wages in USA has stagnated for almost 40 years.
• Trade Deficit – China exported $505 billion worth of goods to the U.S and imported only $130 billion.
• Extreme Inequalities in income and wealth – due to Focus on trade and ignoring changes in the U.S. corporate structure and industrial relations and labor reforms.

4. USA claiming by increasing the tariffs it will help in reducing U.S. trade deficits, bring back well-paying manufacturing jobs

5. Facts about USA trade relations with other countries

• It is estimated that 87% of computers and electronics, which constitute the largest share of Chinese exports to the U.S., includes parts from other countries like South Korea, Japan, and the U.S. itself.
• Exports from China account for 3% of Chinese manufacturing revenue.
• USA imports from china also include products from other countries.
• Non-Chinese owned companies account for almost 60% of Chinese exports to the U.S ranging from boat motors to Computer products.

6. Impact of the measurement

• The net result is that the burden of the tariffs will be felt by consumers in the U.S. (e.g. Increase in price of Washing Machine in USA).
• Declined in South Korea’s car export to China.
• Depreciation of Chinese currency by 7 % due to declined export.
• German car producers in USA faced negative impact after china retaliated with high tariff on USA.

7. According to author, skilled labor play an important role in an economy with increasing involvement of computers and numerical controlled machine.

8. Constant upgrading of labor skill is vital and Washington has made no effort.

9. He has cited the example of Tim cook who has shifted his company in China not because of cheap labor but because of wider pool of skilled labor.