Trump can’t reverse US trade gap with tweets alone

By Hu Weijia Source:Global Times Published: 2019/5/12 21:50:35

In a tweet, US President Donald Trump said "Such an easy way to avoid Tariffs? Make or produce your goods and products in the good old USA. It's very simple!" 

Is it really that simple? If companies doing business in China can dodge tariffs by relocating production to the US, why do so many US firms still choose to stay in China and some even expand their operations amid the China-US trade war?

Nearly every US president in recent decades wanted to bring manufacturing jobs back the US, but US companies want to take advantage of China's low cost production and full supply chain to make profits.

Since China's reform and opening-up began in 1978, many US companies have showed great enthusiasm for investing in and manufacturing in China, making the country a key production and processing base for US enterprises. 

Profit-seeking is a natural instinct of capital. As long as they can make money in China, they won't come back to the US, even with increased tariffs. US brands' decisions to keep their production lines in China have added to evidence that returning to the US is costly rather than profitable.

An annual white paper by the American Chamber of Commerce in China showed that 69 percent of US companies surveyed were profitable in China in 2018, while 21 percent of those surveyed at least broke even. Despite Trump's tariffs imposed in the trade war, US companies' earnings were good in China. Why would they ignore their interests and follow Trump's advice to move production back to the US? 

Many US companies have shown great enthusiasm for investing in China. 

Figures released by China's Ministry of Commerce showed that US investment in China surged by 71.3 percent in the first quarter of 2019 on a yearly basis. US companies have voted with their feet by choosing China instead of returning to the US for their future production.

Economic ties between China and the US are complex and uneven. Some longstanding issues such as China's trade surplus have been affecting bilateral ties, but they are the result of long-term developments and there is a strong economic logic behind those thorny questions. 

Without hard work as the basis to improve the profitability of US companies at home, Trump can hardly reverse current China-US trade relations and bring manufacturing jobs back to the US through a trade war.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn

Posted in: EYE ON ECONOMY

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