Alibaba’s Chief Executive Jack Ma warned in an op-ed in The Wall Street Journal on Wednesday (April 11) that a trade war between the U.S. and China would harm all parties involved.
In the opinion piece, Ma said that while he has been encouraged by the pro-business policies coming out of Washington, such as the tax reform bill, he’s having a hard time trying to figure out how a trade war with China would help the U.S. economy.
“The U.S. has a structural trade deficit with China because of the market forces of comparative advantage: Economies produce what they are best at making and import other things,” wrote Ma. “Dollars earned from trade surpluses in China have been recycled to finance American borrowing, keeping U.S. interest rates low with favorable economic conditions. American unemployment stood at 4.1 percent in March, a 17-year low. All these economic indicators suggest that the U.S. economy is doing well, regardless of the trade deficit.”
Ma pointed to Apple as an example of what can happen when the two countries work together. He noted that Apple designs the iPhone and develops the proprietary chips and software in California and builds the device via millions of workers in China.
“While countries like South Korea and China collect revenue from selling components and assembling the final product, Americans make almost all of the profits. Apple’s $48 billion of profits in fiscal 2017 will not make it into the balance-of-trade calculation,” he said.
The CEO warned that China is transforming its economy from being the biggest exporter to the largest consumer. Wealth is growing among Chinese citizens, which means they have more money to spend on discretionary items and are seeking out high-quality, imported products, including food, cosmetics, fashion and health and wellness goods.
“Chinese consumers are already driving massive demand for imports from all over the world. It is therefore ironic that the U.S. administration is waging a trade war at a time when the largest potential consumer market in the world is open for business,” Ma said, insinuating that a trade war will only provoke a retaliation. “The U.S. has been a consistent defender of free and open markets, but this time it is resorting to protectionism that will not improve American competitiveness. Any country seeking to increase exports would do better to focus on developing good products and channels to access foreign markets rather than putting up trade barriers.”
He warned an escalating trade war by the U.S. would hurt millions of American small businesses and farmers.
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