As trade dispute continues, US-China relationship already being redefined
Chinese consumers for the first time last year bought more Cadillacs than Americans did, helping drive profits at General Motors. And though the designs for those Cadillacs may have been drafted in Detroit, nearly all of the luxury automobiles were assembled in China by some of GM’s nearly 60,000 local workers.
This growing dynamic — of American companies serving Chinese consumers with products made in China — marks a shift in global trade that could pose a significant challenge to President Donald Trump’s “America First” agenda.
Trump has based his campaign to refashion economic relations with China on the well-established notion that the country undercut American workers through low-wage manufacturing of goods exported to the United States.
That campaign entered a new chapter this past week when Trump once again hiked tariffs on Chinese goods after declaring himself dissatisfied with the pace of negotiations on a new trade agreement.
But whether he succeeds in securing a trade deal, many economists and executives say, the nature of the business relationship between the United States and China already is being redefined.
After four decades of economic change, China is morphing from a low-wage exporter into the largest consumer market for a growing number of industries, including automobiles, video games and computers.
“We’re at the end of a period of the globalization of production,” said William Overholt, a senior fellow at Harvard University’s Asia Center. “We’re at the beginning of a period of globalization of consumption in which the center of gravity moves from baby boomers in the west to the relatively young Chinese.”
A decade ago, for instance, Chinese consumers bought 71 percent of the products manufactured in China, according to the McKinsey Global Institute. Today, the Chinese buy 85 percent of what they produce — and their economy is three times larger.
By next year, China’s per-person income will have doubled since 2010, according to the Organization for Economic Cooperation and Development.
The phenomenon, which is also seen in other quickly developing countries such as India and Indonesia, will create a new set of winners and losers.
In the United States, the principal beneficiaries of the era of globalized consumption are likely to be investors and highly skilled employees, rather than the blue-collar workers who suffered as companies moved overseas.
“It’s definitely a profits story,” said Dean Baker, senior economist at the Center for Economic and Policy Research. “It’ll have very little to do with any jobs here.”
In the past, Americans bought up the low-cost goods made in China, which was a boon for Chinese workers and also for cost-conscious Americans. But, in seeking to cater to the Chinese consumer, the reverse is not true. American companies instead are setting up factories there and in other developing markets.
Already, United States-based multinationals have been creating jobs faster in China than at home, according to the Bureau of Economic Analysis. Since 2009, corporations have increased their Chinese workforce by 86 percent to 1.7 million — roughly four times the rate of increase at home.
For Trump, that means a trade policy that often seems to promise a return to an earlier era before globalization could disappoint, even if he secures a good deal with the Chinese.