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1/31/16

US Presidential Race: Trump: Right on Trade - Peter Morici

Donald Trump has been savaged by economists and media aligned with establishment candidates for tough positions on trade — including a 45% tariff on imports to force China to the negotiating table.

Actually, he’s got it right.

Establishment Democrats and Republicans embrace free trade because it puts free markets first with benefits any decently trained economist should extol.

Unfortunately, trade with China and many nations is hardly market-driven. It actually hurts U.S. growth and victimizes America’s families.

Worse, deteriorating conditions in China threaten to derail the U.S. recovery. Beijing’s statisticians report China’s growth slowed to 6.9% in 2015, down from double digits a few years ago. Western estimates are as low as 4%.

Building apartments and office complexes that attract no tenants, as well as entire ghost cities, counts in China’s GDP statistics — but adds little to productivity. Wasteful outlays have boosted debt to 260% of GDP.

Nervous about a looming credit crisis, Chinese investors are heading for the doors—selling yuan for dollars to invest in overseas real estate and securities.

This makes global stock markets panic and pushes down the yuan against the dollar — making Chinese goods artificially more price competitive against American-made products than underlying costs warrant.

Trump: Right on Trade - The Globalist

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