Hi. We're here with Carl Tannenbaum, Chief Economist of Northern Trust. Carl, great to see you.
Good to be with you.
So the United States has been getting more aggressive with China. What's been going on?
Well for a very long time, ever since China was granted entry into the World Trade Organization, its share of world manufacturing has grown remarkably. Which means that the United States here has shrunken, and so has our manufacturing employment. The Chinese have periodically offered additional openings to their markets, but those don't seem to be forthcoming. And in addition, they seem to be taking steps to protect their local industries, which makes it harder for foreign competitors to get a foothold
Much of what you describe is not new. Why the urgency now?
Several factors have worked together to raise the temperature around our trade relationships with China. First is the sheer size of our trade deficit with them, which now exceeds $700 billion annually, twice what it was in the early 2000s. Secondly, I think there is a desire, both politically and economically, to make an issue of this, in order to make the playing field a little bit more level. And thirdly, I think there's a strategic issue, in that China has been accused, periodically, of appropriating our technology, which could put them in a much better position to dominate certain markets going forward.
Fair enough. So what are the risks of taking a more confrontational approach?
Well, we do. So a lot of things to China, which they noted when they retaliated against our tariffs. They've turned around and targeted our agricultural products, among other things, which sell very well in China, and which a lot of our communities depend.
So if you take a look at a map of where the tariffs will hit, and the base of support for the anti-China rhetoric, you'll see a very close correspondence.
I also would note that we are engaged with China on some strategic things, and limiting the aggression of North Korea, in particular. And finally, they do own more than $1 trillion of US treasury securities, which we very much appreciate, given the growing size of our national debt.
So how do you see this playing out.
I suspect, in the months ahead, we'll have a few more periods of bluster. But the hope is, I think on both sides, that after making some strong statements in the public, that they'll go back behind closed doors and realize that the economic cooperation between the two countries is essential for the success of either one of them.
So while it may seem remote for now, I do think negotiation will lead us to a new equilibrium that everybody will be pleased with.
All right. Carl, thank you for your time.