5 Questions on Trade Ties: Protectionism is not the answer to manufacturing revival

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The Trump administration said they want to put the Tariff plans into place in order to reduce the US trade deficit but does the US trade deficit necessarily mean a negative impact on US economic growth?

According to the US Gross domestic product ( GDP ) growth and imports growth figure, if US imports decline more than eight percent, its GDP growth is below zero on average, but if its GDP growth exceeds four percent, import growth is at 7.6 percent on average.

The reason is that when the economy is robust, there will be a higher consumption demand, which means more imports and leads to a rising trade deficit.

Experts say China-US trade frictions are the result of a changing global economic landscape and the development of global value chain. The Trump administration's main appeal is to make the US return to manufacturing and enhance its real economy.

Donald Trump has promised voters that he will come up with trade policies to bring back American jobs and revive the country's manufacturing sector.

The president is trying to lure back American manufacturers from overseas by cutting taxes and raising tariffs on their competitors. But analysts say that might not be the right answer to the problem.

“Manufactory jobs used to represent 25 percent to 30 percent of the economy and now it is eight to nine percent. So very little manufactory is done these days,” said Dennis Chookaszian, a professor from the University of Chicago.

US President Donald Trump delivers remarks at the Make America Great Again Rally on March 10, 2018. /VCG Photo

Chookaszian also pointed out that “the pay rates for workers are too high.”

Analysts say that these firms will have a hard time making profits and competing with foreign companies if American labor costs keep rising.

“It's really gonna hurt the industry more than protect it,” said Rebecca Lindland, an analyst of Kelley Blue Book

In addition to the manufacturing revival, Chookaszian added that another reason Trump made those trade threats is to rally his base and drum up support for the Republican Party as the mid-term election is just around the corner.

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