China is screwing us left and right... I guess
they're using unfair trading practices to steal our jobs and wreck our economy... probably
the American government should do something!
if you're like me you don't know what exactly China is doing that's so bad, so let's find out
yeah a trade could be boring but jobs and the economy are kind of a big deal right now
so let's take a journey together... of knowledge and hopefully by the end you'll know what's what
first what's the trade deficit and why is it so important?
no one would care what China did if we didn't trade with them
we only care because it's hurting us, but how?
we measure how well trading works by keeping track of how many
things we export to other countries versus how many we import
if we're exporting more to a country than we're importing from them we keep some
of their money at the end, but if we regularly import more than we export
that country ends up with more of our money
having a trade deficit isn't always bad--maybe we get more money from somewhere else and spend it on this
country's cool stuff or maybe we can't make stuff fast enough for ourselves
and so trade lets us buy more things and feel richer
you can even get a larger trade deficit while the economy is growing
but experts argue about whether trade deficits mean fewer jobs overall
worse they generally agree that trade deficits can change what kinds of jobs there are
so trade deficits might be one reason why there are fewer factory jobs now
other experts say that the way we measure which country gets the value of
trade is outdated since now most complicated things are made in several countries
which would mean that we aren't losing as much to China as we think
and it's really robots that are taking our jobs
but people talk about the five hundred billion dollar trade deficit with China as a problem
so we'll roll with that--so what's China doing that's supposedly so bad?
one, taxes and regulations--supposedly China is either blocking American companies from
selling stuff there or putting up a bunch of roadblocks that no American companies
can ever get through even though selling there is technically allowed
or China will have such big taxes on imports that a US company can't make any money
for example foreign cars are taxed here at 2.5% but at 25% in China
so people say that companies build factories in China rather than exporting
the stuff from here-- though China's defense is that some other countries
have even bigger taxes on imports, they just don't trade as much so we don't care
two, state-owned companies
China is also accused of cheating because their government often owns companies competing with American companies
then the Chinese company can get special tax breaks and subsidies that make it tons of extra money
China also gives money and assistance to
Chinese companies even if the government doesn't own them
this allows Chinese companies to do something called dumping
no, not like that--gross
dumping is what it's called when a company sells large amounts of something, usually
a raw material like steel or wood, far below what it cost to buy in that country to force its rivals
to lower prices and lose money or keep them high... and lose money
a company can afford to do this if it gets lots of free money from its government
to be fair China says we also subsidize plenty of our own companies
and so does Europe--either we give the money directly or through tax breaks
Three, currency manipulation
this doesn't mean that lame magic trick where someone pretends to pull a quarter out of your ear
though it would be awesome if all Chinese economists also had to go to Magic School
currency manipulation is based on exchange rates--the exchange rate is how much of one currency you can get
with another--rich countries have really valuable money which is why you
can spend like $11 in another country and it counts as 37,000 of their money
a government like china can try to affect the exchange rate through a complicated... you've fallen asleep haven't you?
fine, just remember that making your own currency less valuable compared to another country's
means that when they buy stuff from you it's cheaper than it would be otherwise
the stuff China makes is already cheap so this makes it even harder for American companies
to compete on price in the US--on the flip side, other countries complained when we
stimulated our economy through the Federal Reserve after the 2008 recession
for more information on how the Fed did it, called "quantitative easing" check out
the video I made on that--right now China might be trying to make its currency
more valuable to stop economic problems so the manipulation could have solved itself
four, stealing technology...with hackers!
for our younger viewers, I'm referencing a historical documentary for the 90s--it was a simpler time
Chinese hackers break into the computers at American companies and steal their
ideas and technology so they can make them for cheap but not have to spend
anything on research--they can even steal marketing plans and advertising ideas
the companies can't make too big of a stink, they say, or they won't be able to sell anything at all in China
the former director of the NSA said that Chinese hackers had hit every major American company
we can only guess how much this costs American companies
but experts think it's around 300 to 400 billion dollars a year
for comparison's sake the federal government spent $3.9 trillion in 2016
the Department of Justice thinks it's cost us more than two million jobs as well
the Chinese government or Chinese companies
will also just buy companies in other countries to get their technology or to get an advantage
over their rivals--on the bright side it looks like at least
the hackers who work directly for the Chinese government have slowed down
since President Obama and his Chinese President signed an agreement in 2015
though no one knows how much they've slowed down or how long it will last
so what will President Trump do about this?
all of these different complaints have been brought against China either at the world trade organization, called the WTO
or in court--the problem with the WTO is it is a voluntary thing that the US and
China agreed to, so even if we win China isn't forced to do anything or maybe
they do something but it doesn't fix the problem--and we don't always win
plus sometimes we ignore the WTO too like when we lost a case to Brazil in 2014
about money we were paying American cotton farmers--it's the same in court
cases because the country has to agree to enforce the ruling
we can seize anything that's in America, like bank accounts, but that would cause its own
set of problems: China might start seizing American companies stuff or put
up more barriers to our trade which would kill jobs
the same thing might happen if Trump slaps a big tax on Chinese imports like he's talked about doing
or if Congress passes a law making it harder for Chinese companies to buy American ones
right now the Chinese government seems to think that we need
to be able to sell to them too badly to make too much of a fuss
Trump can try to negotiate a deal that both sides would agree to since China
does need to sell to us too, and they're trying to grow their technology industry
and if we block them out they can't do that
some experts also think that China is trying to avoid a recession which would
mean they have more reason to negotiate--the trick is whether we can figure out
something that solves everyone's problems
what China's been doing so far has made them rich after all
all and there you have it--as always like and subscribe to know when new videos are coming out
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our next video will cover how people pick colleges degrees and jobs and if there are better ways to do that
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