Commentary
Michael Pettis
{
"authors": [
"Michael Pettis"
],
"type": "legacyinthemedia",
"centerAffiliationAll": "dc",
"centers": [
"Carnegie Endowment for International Peace"
],
"collections": [],
"englishNewsletterAll": "asia",
"nonEnglishNewsletterAll": "",
"primaryCenter": "Carnegie Endowment for International Peace",
"programAffiliation": "AP",
"programs": [
"Asia"
],
"projects": [],
"regions": [
"North America",
"United States",
"Western Europe"
],
"topics": [
"Economy",
"Trade"
]
}
Source: Getty
In The Media
American Anger May Give Way to a Protectionist Response
While the U.S. trade deficit will still increase over the next year, growing anger in the United States over trade imbalances is likely to result in new protectionist policies.
Published on Jul 23, 2010
Source: The Economist
Net capital exports, of course, are simply the obverse of current account surpluses, and one of the easiest ways for policymakers to increase net capital exports is to do so officially, through reserve accumulation. This is what seems to be happening. The combination of currency intervention and financial repression (setting domestic interest rate artificially low) allows central banks to accumulate foreign reserves in a non-inflationary way, and, as a consequence, to turbo charge the current account surplus, although at the expense of overinvestment and, in the case of some countries, severe domestic imbalances.Obviously this can only go on if there are countervailing current account deficits and net capital imports elsewhere. Until recently there have been two very large countervailing deficits—that of the US and that of the trade-deficit countries of Europe. The latter, because of the European financial crisis, will have real difficulty in maintaining their trade deficits as net capital imports dry up, so that pretty much leaves the US as the world’s only great trade deficit country.
The appetite in the US for running up larger deficits, however, is clearly finite. I expect rapid reserve accumulation, along with a rising US trade deficit, will continue over the next year or so but will thereafter slow sharply—not because of intelligent and responsible polices implemented by policymakers in the major economies, but simply as a consequence of rising anger in the US and a protectionist move to counter trade policies elsewhere. It is hard to see how this does not end badly.
About the Author
Michael Pettis
Nonresident Senior Fellow, Carnegie China
Michael Pettis is a nonresident senior fellow at the Carnegie Endowment for International Peace. An expert on China’s economy, Pettis is professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets.
- What’s New about Involution?
- Using China’s Central Government Balance Sheet to “Clean up” Local Government Debt Is a Bad IdeaCommentary
Michael Pettis
Recent Work
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
More Work from Carnegie Europe
- Taking the Pulse: Is it NATO’s Job to Support Trump’s War of Choice?Commentary
Donald Trump has demanded that European allies send ships to the Strait of Hormuz while his war of choice in Iran rages on. He has constantly berated NATO while the alliance’s secretary-general has emphatically supported him.
Rym Momtaz, ed.
- Is the Radical-Right Threat Existential or Overstated?Commentary
Amid increased polarization and the influence of disinformation, radical-right parties are once again gaining traction across Europe. With landmark elections on the horizon in several countries, are the EU’s geostrategic vision and fundamental values under existential threat?
Catherine Fieschi, Cas Mudde
- Planetary vs International Security: Economic Growth at the CrossroadsResearch
Economic growth is at the heart of a dilemma between planetary and international security.
Olivia Lazard
- Europe and the Arab Gulf Must Come TogetherCommentary
The war in Iran proves the United States is now a destabilizing actor for Europe and the Arab Gulf. From protect their economies and energy supplies to safeguarding their territorial integrity, both regions have much to gain from forming a new kind of partnership together.
Rym Momtaz
- Taking the Pulse: Is France’s New Nuclear Doctrine Ambitious Enough?Commentary
French President Emmanuel Macron has unveiled his country’s new nuclear doctrine. Are the changes he has made enough to reassure France’s European partners in the current geopolitical context?
Rym Momtaz, ed.
