U.S Trade Deficit with China in 2015 was seen at 365 billion dollars.This a new look, this has slightly increased from last year record which was 343 billion dollars,This deficit has existed because US export to China was seen at only 116.2 billion dollars while import from China has been hit new record track of 483.9 billion dollars,The deficit has been growing because import has been faster rising than exports.The US imports well for consumers from China, then so many imports are US based corporations that only sends the raw product to China for less assembly cost, Then these machines are shipped to the US again these are called Import though we can see they directly profit American companies in China.(Federal Reserve board)
Is U.S. Trade Deficit with China Dangerous?
To understand the trade deficit with china; It poses a significant danger to the US, looking at first we have to have numbers calculated, the way accounting measurements are done in China.Product final bill is counted as an import from China.Most of the trade done between China and America companies who mostly is the beneficially? US is the primary beneficiary because the US imports real for consumers from china, then so many imports are US based corporations that only sends the raw product to China for less assembly cost, Then these machines are shipped to the US again, (Kimberly,2016).
The great danger lies as long as long-term public policy has been ignored with concern on how and why companies should be involved in “Free trade” are companies just allowed to get away with amount legislated as tax end up to little tax or no tax at all this a great danger between US and China,Also the risk of obtaining full protection and benefits from America legal systems and military guarantee to free access and the safe trade routes internationally (Kimberly, 2016).
Moreover, China is obliged to buy a lot of U.S. Treasury bills that it is nowadays the second largest creditor to the U.S. regime. As from 2016, the US to China debt stood at $1.115 trillion. That made 29 percent of the entire debt owned by overseas countries. Many are worried that this provides China political influence over U.S (Federal Reserve Board).
By China buying US Assets, has helped keep U.S. rates of interest low. That assisted fuel the U.S. boom in housing, this has to lead to mortgage crisis If China stood to stop buying Assets, rates of interest would just rise. That might toss the US and the world at large back into the stagnation. This is nit China's best comforts, as U.S. customers would buy less Chinese exports. China, in fact, is buying nearly as many Assets as ever.
The US deficit with China imposes that U.S. corporations that can't contend with cheap Chinese imports must either sell fewer prices or go out of business. A lot of productions have reduced their expenses by sub-contracting Indians and Chinese workers, adding to the rate of unemployment to rise hence a great danger, Many companies have closed down for the last one decade, and the US has reduced competition in the global market.
To conclude ; China desires this growth to increase its low average of existing Despite its pressures; China will endure being the world's leading owner of U.S. debt.One mighty says this a great danger of deficits, and though it is impracticable to halt international business, it is not objective monetarily unachievable. But slightly decently mistaken, to make global trade goal an automobile aimed at a tax-free method to inspire companies to offshore and apply indirect employment for the only reason of tax-free profit arbitrage.