Carnegie Endowment for International Peace
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While foreign investment usually benefits developing economies and creates local economic benefits in advanced economies, it generally does not benefit advanced economies on the whole except in very limited cases. On the contrary, foreign investment in advanced economies is more likely to lead to higher unemployment or rising debt.
Most of the discussions among economists about the impacts of tariffs and trade intervention are more ideological than logical. While tariffs may cause households to pay more for tradable goods, there are many other ways households, and the overall economy, are affected, positively and negatively. What matters are the conditions under which trade intervention policies are made.
Whether the U.S. current account deficit is harmful or not to the U.S. economy depends on the assumptions we make about capital scarcity. In a world awash with excess capital and insufficient demand, the U.S. current account deficit is a drag on growth.
Rejecting the Trans-Pacific Partnership should not mean the rejection altogether by Washington of the very idea of a stable, rules-based trading system. The world is better off with such a regime.
Instead of a hard landing or a soft landing, the Chinese economy faces two very different options, and these will be largely determined by the policies Beijing chooses over the next two years.
The past two decades of Chinese growth have disproportionately benefited a small elite that has become increasingly entrenched; the next stage must focus on liberal reforms to build social capital more broadly.
The current cycle of globalization could end in a painful period of debt adjustment and payment imbalances across the globe, with a likely slowdown of growth in China, a possible abandonment of the euro, and the risk of increasing U.S. protectionism.
Although an appreciation in China's currency value could benefit the United States in theory, Chinese leaders would likely counterbalance such a rise with policies that could further damage both the Chinese and U.S. economies.
In order to sustain economic growth during its transition toward a more balanced economy and help keep U.S. demand for Chinese exports high, Beijing should invest in the U.S. transportation infrastructure.