The decoupling between the US and China would cost America hundreds of billions of dollars

BEIJING – US economy could lose more than $ 1 trillion in production and long-term global competitiveness if the White House pursues a strong separation from China, according to a report released Wednesday by the U.S. Chamber of Commerce and the Rhodium Group.

Because U.S. President Joe Biden looks set to maintain his predecessor’s tough stance on China, the report’s authors made estimates about the enormous costs of sweeping (rather than targeted) policies to protect the United States. U.S. national security of Beijing’s growing economic and technological weight.

These projected losses include:

• By 2025, $ 190 billion annually in U.S. production would extend 25% of tariffs to all trade with China. Over the next decade, full implementation of these tariffs would cause the US $ 1 trillion to fall below growth potential.
• Up to $ 500 billion in one-off GDP losses if the U.S. sells half of its direct investment to China. U.S. investors would also lose $ 25 billion a year in capital gains.
• Between $ 15 billion and $ 30 billion a year in trade in exported services if China’s spending on tourism and education falls by half that of the coronavirus pandemic.

Research on the 92-page report began in 2019, before the coronavirus pandemic hit the global economy.

Tensions between the US and China have risen over the past three years under former President Donald Trump. His administration tried to use tariffs, sanctions and greater control over cross-border financial flows to address long-standing complaints about China’s lack of intellectual property protection, forced technology transfers and the important role of ‘State in commercial operations.

The costs of separating the two largest economies in the world vary far beyond the immediate dollar figures.

The expansion of US policies aimed at China will also affect other countries, forcing them to reconsider their relations with the US, according to the report. He added that these moves will increase costs for American companies and reduce their ability to compete globally.

The report specifically examined the impact of a broad White House policy on the aviation industry, semiconductors, chemicals, and medical devices. For example, losing China’s large aircraft market could cost $ 875 billion in 2038, according to the authors ’analysis.

To address national security goals, the report said the U.S. government should take “tailor-made actions,” such as restrictions on the export of specific technology licenses.

Completely removing U.S. companies from the Chinese market is likely to have major consequences for long-term U.S. global leadership, according to the report.

“It is critical that U.S. chip companies retain access to the Chinese market and be able to reinvest their sales revenue in China in U.S.-based chip production and R&D to maintain their position in China. global leadership, allowing the United States to set the standards for the future. “

Ultimately, the success of US-China policy will have its costs and will require some painful adjustments, according to the report.

“In the forthcoming political reengineering,” the report said, “the central role of market forces in determining winners and the finite ability of governments to redistribute resources to facilitate the process must be respected.”