What Will Happen if US Stops Importing from China

If the US decides to stop importing from China, how much will China suffer?

–Asked by a Quora user

Haiyan Chen, Beijing:

1. A few decades ago, the United States banned arms sales to China, forcing China to research and develop independently. Now China can produce on its own most of the military equipment, and has become the world’s third largest arms exporter.

2. The United States banned Chinese astronauts from reaching the international space station. Now, China has achieved manned space flight and has begun building its own space station.

Now, China has made clear that all countries in the world are welcome to take part in China’s space station construction program, including the United States.

3. The United States has banned U.S. companies from exporting high-performance chips to China to stop the construction of supercomputers in china.

Taihu Light Supercomputer in China
Taihu Light Supercomputer in China

Now, Chinese developed their own high performance chips, and the TaihuLight supercomputer was born.

In the same way, if the United States prohibits all trade with China, they will force China to change its export-oriented economy.

It does affect China’s economy, but China will certainly adapt and change accordingly.

Thanks to all the American bans on China, you have given us the opportunity to create our own path.

May peace be with the earth!

Vivek Kumar, Consultant at IBM:

If I had to answer this question in simple term I would say ‘Not much’. This may sound weird to some but this is the truth. Let’s talk about this in geopolitical terms. The advent of Donald Trump in USA meant that China had to lessen its reliance on USA as a trade partner. This is what China has been doing for some years now. The OBOR is one step in this direction so that USA won’t feature too much in China’s trade equations.

The macroeconomic figures also vouch for the assertions made in the previous para.

Export of Goods and Service -- China
Export of Goods and Service — China

The contribution of exports as a % of GDP has been on a decline for China. This is clearly shown in the following graphic which shows YoY change in exports for China:

Annual Growth of Exports of Goods and Service -- China
Annual Growth of Exports of Goods and Service — China

If we talk about the trade between China and USA in particular, China’s 22% of total exports goes to North America. That means exports to USA make around 4% of Chinese GDP (in nominal terms). With a growth of around 7% a year ( assuming the GDP growth remains constant), this would be offset in a year or two.

Katie Pedro, former HR Director, Asia at Kabam:

Let’s suppose it will happen, for argument’s sake.

  1. China’s share of exports in GDP for 2015 is 20.87%.

    China's share of exports in GDP for 2015
    China’s share of exports in GDP for 2015
  1. 18% of China’s total exports went to USA in 2015.
China's top 15 import partners
China’s top 15 import partners

So, 20.87% multiplied by 18% is 3.756%. That’s the contribution US import to China GDP. This is 2015 data. According to Trading Economics, Exports from China declined by 6.1 percent from a year ago to USD 209.42 billion in December of 2016. Say the decline of export is equally distributed among all import partners, then the impact on China’s GDP if USA stopped all imports from China shall be 3.53%.

This is not counting China takes any retaliation or increase export to other trading partners.

Kevin Quimbo, Just another deaf-mute:

Oh my goodness.

Ok if the US decides to stop importing from China, how much will China suffer?

China-US Trade Relationship
China-US Trade Relationship

This is 2009.

I don’t know why people are asking this kinds of questions, but seriously…

Okay, let me slap you people in face, with charts of course.

China's Top Trading Partners
China’s Top Trading Partners

As much as you people would think, actually, US is not China’s largest trading partner – its the European Union. And its more balanced than the China-US trade.

Indeed, China-US trade is quite a big deal, and both nations need each other, as much as to the displeasment of the warhawks. But, the China-US trade is not the only thing that exists out there. If US stops importing to China, China would just simply look somewhere else to trade with. ASEAN is a very partner. EU, which has been taking a lot of beating from Pres. Trump’s suggestion, pertaining that its unnecessary, along with US support on Brexit – has made Europe look East. And Russia which has been sanctioned by the West, also looks East. Then around China are countries that have very large population bases, and very large population bases means large markets.

But the question is how much will China suffer. What is the China – US trade in the first place?

The Top 10 US Exports to China
The Top 10 US Exports to China
The Top 10 US Imports from China
The Top 10 US Imports from China

If US stops importing from China, and China retaliates back in stopping imports as well, the first thing that will be affected will be the US.

Many US tech giants like Microsoft and Apple will immediately feel the impact as trade between China and US grinds to a halt. US with any of its fortune 500 companies relying heavily on trade with China either with machinery, vehicles, plastics, and electronic equipment, will then start to have deficits.

As Chinese products have nowhere to go, it will simply flood the markets. According to the law of supply and demand, when demand is low but the supply is high, prices are going to fall down to attract potential buyers. Many nations and trade unions will jump on the bandwagon and starts flocking to Chinese products as they are way cheaper now since the lack of US demand has caused the supply to expand. US products then require those products on the other hand as to look to other nations to trade with. But again, back to the supply and demand, since the US demand is still there, only that it bans Chinese products, other nations will surely increase their prices, and eventually will cause the prices of US products to go even more expensive.

But there is a problem on this system. No country in the world has the industrial capacity that can match China for the moment. Eventually, US products will become more expensive and rarer. If you think an iphone is already expensive, then when China stops exports to the US in response to the stop of imports, prices will skyrocket.

Also, China is a big fan of US products and the booming Chinese middle class who now has access to more wealth, began buying US products. But if this situation is to take place, many industries that relied on trade with China will collapse since aside from the European Union, China is a very important market for the US.

And halting trade with the US will not be the only arsenal China has against the US.

Harry Yang, Thinker and Philosopher:

Temporary small pain but long time big gain.

Exporting to US accounts for 3% of China’s GDP. Although significant, it is far from causing a collapse that so many people hoped for. China will go through a period of price adjustment, first by printing a lot of RMB to match a sudden glut of goods to prevent deflation, then put the money in the hands of the poorest population—-problems solved.

This scenario was rehearsed during 2008 financial crisis. Sudden reduction of export to US threatened China’s economy. What the government did was 1) printed trillions of RMB, 2) removed all tax levied on agriculture sector and rural population, 3) provided a 13% discounts on all purchases for one year to all rural population. As a result, Chinese economy did not feel any shock.

America has benefited disproportionately from globalization. Americans are living beyond their means because they can print green paper to buy stuff made in China, leaving behind pollution and low wages. Chinese are living below their means because the desire to hoard green paper. Therefore it’s high time that Americans should eat from what they can produce with their own hands and not enjoying a living standard higher than anyone else. In a more balanced world, Chinese will work less, relax more, save less, and consume more. Americans will have to work harder, save more, and consume less. The world will be a better place.

Quoted from https://www.quora.com/If-the-US-decides-to-stop-importing-from-China-how-much-will-China-suffer

Be the first to comment

Leave a Reply

Your email address will not be published.


*