JX

China: More Trade Tensions

For every $1 import from China, by an estimate I read there is $3 GDP produced domestically in the US -- for instance upstream design, marketing, management, & downstream retail, distribution, repackage, etc. In your example of $250 billion reduced import from China, assuming everything else being equal, if we use that 1:3 ratio, the US would lose $500 billion in overall GDP (loss of $750 billion in domestic economic activities, and gain of $250 billion in less trade deficit).

On the other hand, to China that $250 billion loss in export to the US, assuming everything else being equal, will reduce the portion of the overall imports to produce that final $250 billion. The loss of GDP, a wild guess would be around $50 billion.

On Sep 25 11:50 AM CautiousInvestor wrote:
> To make the point and illustrate the challenge, let's assume US consumption
> on Chinese exports falls by $250 billion........a decline of 1.7%
> measured against our GDP. Given the differences in scale, the Chinese
> economy must increase spending by 5.7% to offset the contraction
> in the US.

China: More Trade Tensions

The bulk of the Shinkansen was built when one dollar was worth some 300 yens. You could easily make the same argument back in the 60s and the 70s it was a wasteful project in Japan, while its people was making matchbox cars and suffering from the like of Minamata Disease. Infrastructure investment has a very long return horizon, and continues paying dividends decades later. Most of the future users of the upcoming "wasteful" fast railroads and airports, by my back-of-the-envelope calculation, will likely have about the same expected lifetime school hours as their American counterparts, compared to their parents who had had half of the school hours.