Taxing capital inflows is a far better way to balance trade than imposing tariffs. This would address the root causes of trade imbalances, improve the productive investment process, and shift most of the adjustment costs onto banks and speculators.
Today’s U.S. trade deficits are driven mainly by capital flow imbalances. Tariffs are less efficient and only work by distorting the real economy and rearranging bilateral imbalances.
Income inequality in the United States hampers growth and forces up debt. In advanced economies in which investment is not constrained by scarce savings, high levels of income inequality lead automatically to either more unemployment or more debt. Such inequality undermines not only the health of the economy, but eventually also the rich.
While foreign investment usually benefits developing economies and creates local economic benefits in advanced economies, it generally does not benefit advanced economies on the whole except in very limited cases. On the contrary, foreign investment in advanced economies is more likely to lead to higher unemployment or rising debt.
The new round of tariffs has put U.S.-China trade negotiations on hold. Just a month ago, a deal to end the trade war was deemed likely. So why did this process unravel so quickly and what is the way going forward?
Washington and Beijing are not in a new cold war yet, but there is definitely a cold-war mentality at work that may diminish both sides’ capacity to manage crises effectively.
Whether President Trump is misguided in pursuing tariffs and using them as leverage with the Chinese government, America’s continued drive to levy penalties is less about fixing a trade problem than about changing China’s investment rules.
As South Korea pursues engagement with North Korea, thinking about unification through a stabilization framework can provide critical clues on navigating major challenges that unification might bring.
The U.S.-China “trade war” may give way to a “tech war” as regulators and firms battle over emerging technologies, standards, and whether America or China will dominate future industries. Outside Washington, the relationship between Chinese and American business is complex and changing fast.
China’s global strategy has been met with strong pushback. Despite the recent Trump-Xi meeting, the U.S.-China relationship is unlikely to show sign of improvement for quite some time. Where does this leave Europe?