U.S. Faces a Litmus Test in Strategy with China Amid High Decoupling Costs

U.S. Faces a Litmus Test in Strategy with China Amid High Decoupling Costs

America will incur a one-time loss of about $500 billion in GDP if U.S. companies reduce foreign direct investment in China by half, according to Bloomberg. Applying a 25% tariff on all two-way trade would cut U.S. GDP by $190 billion annually by 2025.

  • The U.S. Chamber of Commerce estimates that if future Chinese tourism and education spending were reduced by half from the pre-pandemic levels, America would lose $15 billion to $30 billion a year in services trade exports. 
  • Losing access to China’s semiconductor market would cause $54 billion to $124 billion in lost output and put 100,000 U.S. jobs at risk.
  • The imposition of tariffs could result in about $38 billion in output losses and almost 100,000 jobs in the chemicals industry.
  • Losing access to China’s market for U.S. aircraft and commercial aviation services could cost $51 billion annual output or $875 billion cumulatively by 2038.
  • The lost market share could result in an annual $23.6 billion loss in medical device revenues.
  • The analysis highlights the impact of different policies as the Biden administration weights the best strategy for facing challenges posed by China.
  • The Chamber of Commerce recommends the U.S. working with allies to confront China on its state-led economic model and national security concerns rather than acting unilaterally.
  • The chamber also prefers a “rules-based” economic order and against Chinese practices unfair to American companies.

The U.S. dollar is slightly gaining against Chinese Yuan. USDCNY is up 0.01%

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