Interview: Trade war with China "negative for America," says Yale scholar-Xinhua

Interview: Trade war with China "negative for America," says Yale scholar

Source: Xinhua

Editor: huaxia

2024-03-30 11:17:00

by Xinhua writers Deng Xianlai, Xu Yuan

WASHINGTON, March 29 (Xinhua) -- The trade war with China "has been a negative for America," as it's a politically motivated and disruptive policy never achieving Washington's goal of eliminating trade deficit, said a Yale University scholar.

"I've been long critical of the belief that the United States or any nation can resolve bilateral trade imbalances (by a trade war) in a multilateral world," Stephen Roach, a senior fellow at the Paul Tsai China Center of Yale Law School, told Xinhua in a recent interview.

Roach said that the persistent shortfall of domestic savings, rather than the practice of U.S. trading partners, is the root cause of Washington running trade deficits with not only China, but also a multitude of other countries around the world.

The lack of domestic savings "remains quite pronounced" to the extent that "our net domestic savings rate was slightly negative last year" after adjusting for depreciation, according to Roach, who, before joining Yale in the 2010s, was chairman of Morgan Stanley Asia.

"Lacking in domestic savings and wanting to invest and grow, we import surplus savings from abroad. And we run these massive multilateral trade deficits to attract the capital," said the economist.

"Did we achieve what we were hoping to do, which is a reduction of our broad trade deficit? Absolutely not," he said of the imposition of tariffs on Chinese goods, which was initiated by former U.S. President Donald Trump in 2018 and largely inherited by his successor, Joe Biden.

Launching a trade war with China, the investor-turned-scholar said, "is a reflection of the unfortunate political dimension of our anti-China bipartisan strategy that Washington has fully embraced. But it has not achieved the broad economic objectives that our politicians promised the American public that would take place."

Notwithstanding the tariffs, China remains "a major source of foreign supply to the United States" as well as "a major destination for U.S. export growth," Roach noted.

"By putting tariffs and other types of sanctions on our largest source of imported products, that's the functional equivalent of attacks on American companies and American consumers," he said, adding that on a "simple basic level, the trade war has been a negative for America."

A big shift in U.S. supply chains occurred in the past few years under the guidance of what was known as the "friendshoring" strategy, Roach said.

He added in a further explanation that in implementing the strategy, the U.S. government asked American companies to divert their supply chains away from countries Washington judged to be either politically or economically "threatening," and "toward nations that are more aligned with our value and political interests."

The United States has exhibited a greater willingness to ensure "national security" than pursue "economic efficiency," Roach said. In so doing, Washington has "put pressure on many nations around the world who have strong trade relationships with both the United States and China to pick sides" when conducting supply chain related activities.

The consequence of the United States strongly advocating for "friendshoring" has been "very disruptive," Roach said.

On the "de-risking" rhetoric promoted by the Biden administration to defuse concerns of a U.S.-China economic "decoupling," Roach said the distinction between the two terms "exists only in words, but not in reality."

Given that the products brought into the world market -- many of them by China -- have become increasingly sophisticated, "I just think it's very hard to draw the line" between de-risking and decoupling, Roach said.

"We are clearly, under the guise of de-risking, advocating a certain amount of decoupling," Roach said. "We're kidding ourselves if (we claim) we're not."

Roach warned against injecting "geopolitical fears" once seen in "great power battle" in the past into the disputes that currently exist between the United States and China, noting that doing so would send the bilateral relationship "on a very slippery slope."