US-China trade deficit now largest in world history

If the U.S. economy and the Chinese economy continue to grow at current rates, the average Chinese citizen will be wealthier than the average American citizen by 2042, says Stanford University economics professor Ed Lazear.

Some business leaders, though, don’t fret about that, figuring that the benefits of free trade with China will outweigh any negative consequences.

“The deficit problem is a much bigger problem for China than for the U.S.,” WB advisors managing director Albert Lu told TheDC. “A hard-line retaliation in the form of trade barriers, by Romney or other administration will penalize Americans by hampering their access to Chinese goods and raise prices at the worst time.”

Lu’s firm is a registered financial adviser and precious metals dealer in Houston. He explained that “China’s currency management policy is generally unproductive. But what is often neglected is that the policy hurts the Chinese because their massive productive effort still does not allow them to consume goods.”

Others are increasingly worried about what the massive trade deficit means for America’s future. They are concerned that the U.S. is involved in a race-to-the-bottom pricing war — the global equivalent of coupon promotions for shampoo — that it simply cannot win.

“People in general want low-cost computers and automobiles,” Dr. Sally Mounts, president of the management consulting firm Auctus Consulting Group, told TheDC. “Because they do, they are myopically oblivious to the problems inherent in a nearly three billion dollar trade deficit with China.”

“Over the past decade,” Mounts added, “the deficit has caused massive job loss in key manufacturing areas, Chinese-American price wars that necessitated U.S. outsourcing to India — thus causing further job loss — and sobering implications for our economic future.”

But other leaders, including some logical vice-presidential hopefuls in the GOP, don’t think America’s problem is its oblivious consumers who seek bargains from Best Buy or Amazon.

They think the problem starts at the top, in an Obama White House that engages in class war rather than economic cultivation.

So just as the challenge of Japanese manufacturing was America’s defining economic issue in the 1970s and 1980s, the stunning challenge of the Chinese will be at or near the center of political debates leading up to the November elections.

“Unlike any leader in modern American history, we are led today by a president that has decided to pit Americans against each other,” Florida Republican Sen. Marco Rubio said yesterday at the Conservative Political Action Committee.

“The basic argument he [Obama] is making to our nation is that the reason why some of us are worse off than we used to be is because other people are doing too well. That the only way for some of us to do better is for some people to do worse.”