To: American Foreign Policy Class

From: Group 4

Date: 3/23/2019

RE: Why Can’t Trump Cut the Trade Deficit With China

Executive Summary:

China in the past few decades has emerged as the world’s largest exporter and the United States’ second-largest trading partner. Trade with China has led to the loss of American manufacturing jobs, reduced real wages for semi-skilled workers, and devastated some communities dependent on low-end manufacturing jobs. Some have estimated that China’s reform and opening up explained 25 percent of the decline in American manufacturing jobs between 1991 and 2007, and 40 percent of the loss after 2000. President Donald Trump has made reducing the U.S. trade deficit with China a target of his administration, but new figures out Wednesday show that it hit a record for a second straight year under his watch.

The inaccurate assumption to Economic Growth and why Trump is using the wrong tools to handle the Trade Deficit:

The assumption that a negative trade balance, caused whenever the United States imports more than they export, leads to a decrease in economic growth is extremely inaccurate because, in the formula used to calculate gross domestic product, the “imports are only subtracted from exports to avoid counting domestic consumption twice”.  When analyzing economic growth, the two sets of economic data that often cancel each other out are current account and capital account. The current account measures the “balance of trade and investment incomes”, while capital account measures the changes that occur in long-term investment positions. According to McDaniel, President Trump “could reduce the capital account surplus, and indirectly reduce the trade deficit, by taxing new inflows of foreign investment”, which in hindsight “that would “be contrary to his goal of encouraging foreign companies to build more facilities in the United States”. The agreement Trump is currently attempting to reach with China will most likely include a major purchase of U.S. agricultural, energy, and manufactured goods. Despite its potential of helping the two-way trade deficit in the short-term, McDaniel claims that in the long-term the deficit will still increase considering the United States would continue with its low savings rate.

Explanations for China Buying Less American Goods and the Unintended Effects of Trump’s Trade War

China has bought less US goods for a variety of reasons. In the last few years, China’s economic growth has slowed thereby reducing the demand for American-made goods. China has also retaliated after President Trump’s imposition of tariffs by lessening the buying of American goods. Trump’s tariffs are also having the effect of incentivizing American importers to buy Chinese goods quickly so the goods can arrive before potential tariff increases in the future. This buying surge is increasing the trade deficit and thus the tariffs are having the opposite effect, at least short-term than they were intended for.

The strength of the United States Dollar and Lack of Savings over Investment:

Americans have proven to be incredibly frivolous in their saving habits, especially compared to people of other nations with whom we trade. This contributes to the budget deficit in that if we saved more and spent less, it would simply decrease over time, but we do not.  If we saved more, the value of the American dollar would increase, thus making our exports more expensive and closing the trade and budget deficits. Conversely, some will argue that the dollar is too strong and that a dollar of lesser value would allow exports to increase faster than imports, and thus close the deficit.  Both are unique and differing perspectives on how to close the trade deficit, which many Americans feel highlights the unfairness with which many of our trade partners treat us and closing it would ensure more equitable trade deals.

Future Implications:

Going forward, the Trump Administration’s options are bleak. With nearly $200 billion worth of tariffs imposed on Chinese goods, American consumers continue to see the end of it. In an article published in the New York Times, titled ‘As Trump Moves to End Trade War With China, Business Asks: Was It Worth It?’, as tariffs are laid on the Chinese economy, they, in turn, are passed back to the American consumers through higher prices on imported goods. Both China and the United States must come to an agreement that will benefit both sides. In order to reach common ground, it is crucial for the United States to feel their interest are a priority on negotiations. Beijing has pledged to purchase hundreds of billions of dollars worth of American goods and services in hopes of narrowing the trade deficit. However, in doing so China would demand President Trump to drop all tariffs held on Chinese products. With a focus in helping the American economy, this move may act as a catalyst towards bringing both sides to a mutually fair agreement. With so much controversy over this topic finding the end is yet a possibility, only in time will the solution be found.

Works Cited

Palmer, Doug, and Adam Behsudi. "Why Can't Trump Cut the Trade Deficit with China?" POLITICO. March 06, 2019. Accessed March 23, 2019.

https://www.politico.com/story/2019/03/06/trump-china-trade-deficit-growing-1243639.

Swanson, Ana, and Jim Tankersley. "As Trump Moves to End Trade War With China, Business Asks: Was It Worth It?" The New York Times. March 05, 2019. Accessed March 23, 2019. https://www.nytimes.com/2019/03/04/us/politics/trump-china-tariffs-trade-deal.html.

Al-Qaeda Advancement in Northern Syria pressuring Threat of Breaking Cease-fire

To: American Foreign Policy Class

From: Group 4

Date: 2/1/2019

RE: Al-Qaeda Advancement in Northern Syria pressuring Threat of Breaking Cease-fire

Executive Summary:

Recent truce between Syria, Russia, and Turkey was brokered, demanding an immediate ceasefire in the province of Idlib, located in Northern Syria bordering Turkey. Within the past week, Al-Qaeda linked terrorist group, Hayat Tahrir al-Sham (HTS) has taken control of two dozen towns and villages in the province; accumulating to 3,475 Square miles or 5% of Syrian territory. HTS now pressures the weak truce between nations, threatens security of Russian air bases, and displaced millions of citizens from their homes, threatening government justification on province.

Hayat Tahrir al-Sham Stresses Weak Truce Between Bordering Nations Sparking Potential Break of Truce:

Turkey, holding nearly a dozen posts along the province of Idlib has since shifted focus of threat along the eastern front, protecting the border from Syrian Kurdish troops; with preparation of an offensive. With threat of breach in the south, it is possible Turkey once again will shift focus of an offense, targeting the Northern Syria border to ensure protection of National Security; threatened by HTS. This act would breach the ceasefire agreement, causing conflict along the Northern territory again. Ankara (Capital of Turkey), senses Hayat Tahrir al-Sham’s seizure of the territory is an act aimed at destabilising the agreement reached in September by both countries. Russia, ally of Syria has urged the Turkish government to act decisively in restricting militant action along their southern border. One may consider, if Turkey chooses resolute action the threat may be peacefully dealt with, de-escalating potential threats and continuing the ceasefire agreement between nations.

Threat on Russian Airbase Security in Case of Breach in Cease-Fire:

Russia, an ally with the Syrian Assad Regime controls the skies which grant many advantages for the country in protection of outside threats. Being located on the neighboring Coastal Province of Latakia, Russian air base, Khmeimim becomes a major concern for security. Prompting Russian Offense on Turkey in addition to Syrian Forces. In the event of Turkey pursing action against HTC, along the southern border Syria would view the acts of aggression as threat against the Nations security. In turn, Russia, considering its interests with Syria and real estate within the country would retaliate against the Turkish government. Escalation on both sides would produce offenses proving to be detrimental, creating stronger tension between countries than prior existing.   

Hayat Tahrir al-Sham Seizure of Idlib Territory Displaces Millions of Citizens While Posing Government Threat on Territory:

With seizure of two dozen towns and villages in the province HTC has forced many Syrians from their homes, to avoid threat of danger. With numerous aid agencies instituted in the region there becomes threat of whether these agencies will pull out of the area. In the event of a withdrawal, civilians are left exposed without food and water along with desertion of medical support. Loss of these agencies gives incentives for the Syrian government and Russian forces to justify deadly offenses on the territory, which would lead to thousands of civilian casualties; breaking numerous humanitarian laws. Fawaz Gerges, Professor of Middle Eastern Politics, at the London School of Economics illustrated this potential threat by relating to the “Battle for Aleppo”, leaving thousands of casualties, along with government forces capturing the rebel-held east.

Potential Course of Action to resolve this issue for United States Foreign Policy:

The al-Qaida advancement in Northern Syria is occurring at a time where the United States is both on the cusp of defeating the terrorist group, Islamic State, and preparing to withdraw  2,000 troops from the region. During his presidency, Donald Trump has constantly both vowed to reduce United States presence in the region and complained that U.S allies and partners need to do more in undertaking security in Northern Syria. The decision to lessen their presence in Northern Syria will only lead to difficult times for the United States in preventing themselves from losing all of its leverage in the region. The withdrawal is just leading to the “players” (al-Qaida, Russia, Turkey) in the region to influence the situation in their favor and possibly detrimental to the United States. With the NSA still trying to figure out ways the U.S. can pull out of the region without undermining their interests, the only logical course of action that can resolve this issue in foreign policy is for the United States to reconsider pulling out of Northern Syria.  

Bibliography:

Mroue, Bassem. "Al-Qaida's Advance in Northern Syria Threatens Fragile Truce." Concord Monitor. January 30, 2019. Accessed January 31, 2019. https://www.concordmonitor.com/Al-Qaida-s-advance-in-northern-Syria-threatens-fragile-truce-23137950.

Stein, Aaron. “The Scramble for Northeast Syria.” Foreign Affairs, Foreign Affairs Magazine, 22 Jan. 2019, www.foreignaffairs.com/articles/turkey/2019-01-22/scramble-northeast-syria.