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Economists say reducing trade deficit not an excuse for trade war

Source: Xinhua| 2018-04-06 07:06:41|Editor: Liangyu
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HOUSTON, April 5 (Xinhua) -- Imposing tariffs on Chinese imports will not reduce U.S. trade deficit with China, economic experts told Xinhua Thursday.

Experts agreed that one of the reasons for U.S. administration's decision to impose tariffs on Chinese imports is the U.S. trade deficit with China, but the move will not achieve the goal since the causes of deficit are not changed by setting trade barriers.

"The Trump administration tries to open the Chinese market and reduce China's exports through trade war, but the trade war cannot solve the problems and change the root causes," visiting scholar at University of Texas Shaobo Wen told Xinhua.

Wen commented that even if the United States unilaterally reduces the trade deficit with China, its foreign trade deficit will continue, only transferred from China to other countries.

"From a historical perspective, trade wars not only fail to solve the problems, but on the contrary, if managed inappropriately, will escalate into crises," he added.

Professor of Finance and Economics at University of Texas Stephen Magee explained that there are two reasons for the trade deficit of the United States with China. First, China is very competitive in manufacturing because of low wages. Second, China has much higher governmental and individual savings rates.

"Thus United States has the advantage of buying cheaper manufactured goods and funding American investments with abundant Chinese savings," he noted.

According to Brian Trinque, lecturer in the department of economics at the University of Texas, trade deficit should not be manipulated by policies.

"Deficits are not bad, and huge deficits are not worse than small deficits. Policies that are intended to manipulate the size of a deficit have no basis in economics," he said.

The U.S. administration on Tuesday announced a proposed list of products subject to additional tariffs, which covers Chinese exports worth 50 billion dollars with a suggested tariff of 25 percent.

China on Wednesday hit back at the U.S. unilateral action with its own tariff plan. It unveiled a list of products imported from the United States worth 50 billion dollars that will be subject to higher tariffs. The items include soybeans, automobiles and chemical products.

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