So the Chinese routinely send to our shores boatload after boatload of relatively inexpensive stuff that helps fill up our box stores and helps keep U.S. inflation in check.
We send back little pieces of paper that say “IOU.” The Chinese tend to invest their trade surplus in the safest and deepest market in the world, the market for U.S. government bonds.
Their trade surplus, plus a savings glut that results at least in part from the lack of a social-insurance system for the elderly, help keep U.S. interest rates low. The truth is they have little choice. The list of markets/asset classes that could accommodate — without disruption — the volume of dollars they are accumulating is surprisingly small.
No one disputes that blue-collar American factory workers have got the short end of the stick in this arrangement. But anti-free-trade rants of the type Donald Trump has become famous or notorious for ignores the fact that the arrangement advantages a very broad swath of American society.
Note this from Don Boudreaux, professor of economics at George Mason University, posted at his blog, Cafe Hayek:
If the Chinese become zealous devotees of a religion whose doctrine requires that they serve Americans by shipping to Americans goods and services free of charge, then Americans are made better off. If the Chinese innovate in ways that lower their costs of production – and distribution and, thus, enable them to sell goods and services to Americans at lower prices – then Americans are made better off. If the Chinese invent new products and offer to sell these new products to Americans at prices that Americans find attractive, Americans are made better off. If the forces of international competition oblige Chinese producers to lower their export prices to levels closer to their costs of production, then Americans are made better off. If the Chinese government forces Chinese citizens to subsidize the production of goods and services sold to Americans so that Americans can purchase these goods and services at artificially low prices, then Americans are made better off (although Chinese citizens, other than those involved in the export trade, are made unjustifiably worse off). If the Chinese monetary authority buys U.S. dollars with newly created yuan in order to (of necessity temporarily) make Chinese exports artificially inexpensive for Americans to buy, then Americans are made better off (although Chinese citizens, other than those involved in the export trade, are made unjustifiably worse off).
The above reality is missed by people, such as Donald Trump (but hardly limited to him) who judge trade to be ‘successful’ only if the jobs and businesses that it visibly – that is, directly – creates in the domestic economy are perceived as being greater than the number of jobs and businesses that it visibly destroys. This error is among the oldest and most difficult to kill in economics – not only because this error is serviceable to domestic producers who greedily seek protection from competition, but also because it appeals to people who refuse to think beyond what is immediately and blindingly obvious.