Economy

As China eclipses the U.S. economy, here's what Biden can do that Trump didn't: Ask for help – NBC News

Published

4 years ago

December 14, 2020

I needed nine months of pandemic to get interested in “The Crown,” the Netflix show on Queen Elizabeth II’s reign. So while most fans have been obsessing over this season’s drama with Princess Diana, I’m still in the mid-1960s, when the tragedy was Britain’s decline to mediocrity from the heights of empire.

There are things Americans can do to stay in China’s league, starting with accepting their fate and using their friends to greater advantage.

The U.K.’s begging the United States for a bailout to avoid default in 1965 was a sad denouement to the story of the country that colonized most of North America, the Caribbean and South Asia. And it’s hard to do what I do for a living without wondering whether a story of global supremacy is once again coming to a sorry conclusion. After President-elect Joe Biden gets Covid-19 under control and reignites the economy, he should focus on stopping the decline of the American Empire — lest the world’s most important democracy end up a shadow of itself, as Britain did two decades after the Second World War.

The world looks at a country differently when it no longer is supreme, and the sun is about to set on the United States’ eight-decade run as the world’s dominant economy. By some measures that adjust for the value of currencies, China’s economy eclipsed the U.S.’s in 2016. And it’s close to universally accepted that China’s will be the biggest by any measure within a decade.

After President Xi Jinping led the world economy out of the Great Recession a decade ago by ordering a massive stimulus program, his country is set to lead the world again, as China’s will probably be the only major economy that grows this year, according to the International Monetary Fund.

While there’s dispute about when China will reach the largest economy milestone — a research group backed by the Chinese government predicted recently that the flip will occur only in 2032 — the exact date doesn’t really matter. The point is that the U.S. is on the verge of surrendering its most important advantage over the rest of the world. There’s not much the U.S. can do about that, given that China’s 1.4 billion people are getting richer while America’s economic growth has naturally slowed at a high level. But there are things Americans can do to stay in China’s league, starting with accepting their fate and using their friends to greater advantage.

America’s military is often seen as what sets it apart, and while there’s no rival for its armed forces, several countries are capable of inflicting nuclear destruction. Only the U.S., however, has had the financial clout to muscle into any situation it wants to. China will soon be its match on that front, along with being one of the global heavies with an arsenal of nukes. So they are on trajectories that will make them at least equals. The risk is that they won’t stay that way, as history is replete with examples of bad things happening when existing powers refuse to make room for rising ones.

Dec. 4, 202002:38

“A thing that will feel pretty strange is that the Chinese economy is probably going to be at least twice as big as the United States’ economy, maybe three times,” Elon Musk, founder and chief executive of Tesla, said this year. “The foundation of war is economics,” Musk added. “If you have half the resources of the counterparty, then you better be real innovative. If you’re not innovative, you’re going to lose.”

If you question Musk’s credentials to herald an epic showdown, how about Harvard University? The Kennedy School of Government has devoted special attention to the question of whether the U.S. and China can avoid “Thucydides’ Trap,” named after the celebrated author of History of the Peloponnesian War, who observed, “It was the rise of Athens, and the fear that this instilled in Sparta, that made war inevitable.”

Biden’s goal should be coexistence, and the U.S.’s best chance is to beat its Asian rival at its own game.

China has been extending its reach through economic diplomacy of both the friendly and the unfriendly sort. The country created an international lending institution in 2016 as a rival to the World Bank; it already has more than 100 members, and it has been spending the equivalent of tens of billions of dollars throughout Asia and Europe to create a trade corridor that would extend to Europe from East Asia.

Last month, it facilitated the creation of the Regional Comprehensive Economic Partnership, or RCEP, a 15-country trade agreement, including Japan, Australia and South Korea, that will cover 2.3 billion people and about 30 percent of the world’s gross domestic product. In comparison, the U.S. trade agreement with Canada and Mexico covers 28 percent. The RCEP was seen as a publicity win for China, as President Donald Trump abandoned the Trans-Pacific Partnership, a trade agreement that would have tied the U.S. to many of the same countries with which China will partner under the RCEP.

At the same time, China has developed a Trumpian knack for bullying trade partners with arbitrary duties, including the imposing of tariffs on imports from Australia and the blacklisting of canola from Canada, after both countries offended Beijing. The upshot is that China is now viewed as a menace in such countries, when not so long ago it was seen as a potential counterbalance to America’s dominance.

For instance, Canada’s prime minister, Justin Trudeau, had wanted to negotiate a free trade agreement with China when he was first elected in 2015, but that’s no longer on the table. Xi’s government arbitrarily jailed two Canadian citizens two years ago in apparent retaliation for Canada’s detention of a Chinese executive sought by U.S. authorities. China was in a position to make friends, and it has ended up making enemies.

China’s poor treatment of smaller countries is Biden’s opening. The president-elect’s idea to assemble the world’s leading democracies for a summit that would get them all on the same page is a good one. “China can’t afford to ignore half the global economy,” Biden wrote this year in Foreign Affairs.

He’s right. Trump’s mistake was assuming he could use the weight of the U.S. economy to bring China to heel. But China is too big for that now. America needs help. It’s not something for which Americans are used to asking, but it could be the price of maintaining their influence.

Kevin Carmichael

Kevin Carmichael is the national business columnist at The Financial Post and a senior fellow at the Centre for International Governance Innovation. He previously covered the Treasury Department for Bloomberg News and was the U.S. business correspondent for The Globe and Mail.

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Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

Published

2 days ago

November 8, 2024

Anne Joseph

OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

Published

3 days ago

November 6, 2024

Anne Joseph

The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Economy

Trump’s victory sparks concerns over ripple effect on Canadian economy

Published

4 days ago

November 6, 2024

Anne Joseph

As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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