Trump Infrastructure Plan Seen as Key to Dodging China Trade War

Donald Trump’s plan to spend big on infrastructure may determine whether the U.S. and China end up slugging it out in a trade war. The link between those seemingly independent variables all comes down to jobs. If a splurge on airports and rail networks boosts employment and growth in the U.S., there’ll be less need to deliver on promises to deal with the China trade issue, said Michael Pettis, professor of finance at the Guanghua School of Management at Peking University in Beijing. "It might be enough to turn attention elsewhere," said Pettis, former head of emerging markets at Bear Stearns Cos. in New York. "For the world, that’s definitely the best-case scenario."

There is no choice but to spend on infrastructure, Trump said Monday in remarks made in Washington before an address to Congress Tuesday. His campaigning featured pledges to level the playing field on trade with China, which he has accused of "raping" the U.S. with job-destroying currency and trade policies that amounted to "the greatest theft in the history of the world."

Wilbur Ross, who was confirmed as U.S. commerce secretary Monday, warned during his Senate testimony that trading partners should practice “fair trade” and cut state control over business if they want access to the world’s biggest economy. The billionaire called China the “most protectionist” major nation.

China needs Trump’s infrastructure plan to gain momentum quickly because without it there’s no way trade tensions won’t worsen, said Pettis. Such an outcome would be "terrible" for countries with large surpluses like China, Germany and Japan, he said. In trade wars, the surplus countries typically bear the brunt of the costs while deficit countries with diversified economies come out ahead, Pettis said.

The good news is that Trump’s infrastructure plan may prove successful, said Pettis. That’s because the acute need for new and refreshed infrastructure means such spending could stoke growth by more than it inflates debt, said Pettis. "There is this tremendous fear of debt," he said. "But that’s confusing debt with the debt burden. There’s good debt and there’s bad debt. If you borrow $100 and create $110 of value you don’t have a debt problem."

Because the U.S. infrastructure plan will take time to ramp up, trade tensions are still likely to worsen in the short term, Pettis said. After that, the outcome on trade hinges on the impact of Trump’s infrastructure investment. "If an infrastructure investment boom was able to reduce unemployment to practically zero then that’s all that needs to happen," he said.

2370 views

Read on the subject


More World news

Artem Sokolov to Vesti.FM: Russia#039s Kazakhs are losing ties with their native culture

Artem Sokolov to Vesti.FM: Russia's Kazakhs are losing ties with their native culture

Kazakhs living in Russia are gradually losing ties with their native language and native culture, analyst of the Vestnik Kavkaza information-analytical agency, Artem Sokolov, said during live broadcast of the "Peoples of …

UN Secretary General congratulated Assad on Syrian Independence Day

UN Secretary General congratulated Assad on Syrian Independence Day

Syrian President Bashar Assad received positive words from the UN Secretary General this week. Official Syrian media outlets reported that UN Secretary General Antonio Guterres sent a congratulatory message …

Turkish consulate in Thessaloniki attacked with Molotov cocktails

Turkish consulate in Thessaloniki attacked with Molotov cocktails

A group of masked assailants attacked the Turkish consulate in Greece's Thessaloniki with Molotov cocktails early Sunday, Daily Sabah reported citing Doğan News Agency. The group threw two Molotov cocktails at the consulate's …

Crimea to establish association of friends

Crimea to establish "association of friends"

The association of "friends of Crimea", which will unite politicians and economists from different countries, will be established in October of this year.  Ex-adviser of former French President Nicolas …

OSCE staff member dies in car blast in Donbass

OSCE staff member dies in car blast in Donbass

An OSCE monitor died in a car blast in LPR, the militia's press service told Luganskinformcenter on Sunday, TASS reports. "Today, on April 23, 2017, as two crews of the OSCE SMM were going from Slavyanoserbsk to Sokolniki, near …

North Korea says ready to strike U.S. aircraft carrier

North Korea says ready to strike U.S. aircraft carrier

North Korea said on Sunday it was ready to sink a U.S. aircraft carrier to demonstrate its military might, as two Japanese navy ships joined a U.S. carrier group for exercises in the western Pacific. "Our revolutionary forces are …

France votes in presidential election

France votes in presidential election

French citizens are voting for their next President on Sunday following a volatile campaign period that was overshadowed by a terror attack on police in Paris last week. With 11 names on the ballot, no one candidate is expected to win an outright …

Saudi King appoints son as country#039s ambassador to US

Saudi King appoints son as country's ambassador to US

Saudi Arabia’s King Salman bin Abdulaziz Al Saud appointed his son Prince Khalid bin Salman bin Abdulaziz Al Saud as the new country's ambassador to the United States among other …

Baku to host 1st Azerbaijani-Arab business forum

Baku to host 1st Azerbaijani-Arab business forum

Baku will host the first Azerbaijani-Arab business forum in October, said Elshan Rahimov, chairman of the “Cooperation of Azerbaijan and Arab countries” Public Association, AzerNews reported. Rahimov made …

Will there be another anti-terrorist coalition?

Will there be another anti-terrorist coalition?

200 tons of chemicals from Libya are now in the hands of terrorists

more World news