 China is screwing us left and right. I guess. They're using unfair trading practices to steal our jobs and wreck our economy. Probably. The American government should do something. If you're like me, you don't know what exactly China is doing that's so bad. So let's find out. Yeah, trade can be boring, but jobs in the economy are kind of a big deal right now. So let's take a journey together. Of knowledge. And hopefully by the end, you'll know what's what. First, what's the trade deficit and why is it so important? No one would care what China did if we didn't trade with them. We only care because it's hurting us, but how? We measure how well trading works by keeping track of how many things we export to other countries versus how many we import. If we're exporting more to a country than we're importing from them, we keep some of their money at the end. But if we regularly import more than we export, that country ends up with more of our money. Having a trade deficit isn't always bad. Maybe we get more money from somewhere else and spend it on this country's cool stuff. Or maybe we can't make stuff fast enough for ourselves since the trade lets us buy more things and feel richer. You can even get a larger trade deficit while the economy is growing. But experts argue about whether trade deficits mean fewer jobs overall. Worse, they generally agree that trade deficits can change what kinds of jobs there are. So trade deficits might be one reason why there are fewer factory jobs now. Other experts say that the way we measure which country gets the value of trade is outdated since now most complicated things are made in several countries. Which would mean that we aren't losing as much to China as we think and it's really robots that are taking our jobs. But people talk about the $500 billion trade deficit with China as a problem, so we'll roll with that. So what's China doing that's supposedly so bad? One, taxes and regulations. Supposedly China is either blocking American companies from selling stuff there or putting up a bunch of roadblocks so no American companies can ever get through, even though selling there is technically allowed. Or China will have such big taxes on imports that a US company can't make any money. For example, foreign cars are taxed here at 2.5% but at 25% in China. So people say that companies build factories in China rather than exporting the stuff from here. Though China's defense is that some other countries have even bigger taxes on imports they just don't trade as much so we don't care. Two, state-owned companies. China is also accused of cheating because their government often owns companies competing with American companies. Then the Chinese company can get special tax breaks and subsidies that make a ton of extra money. China also gives money and assistance to Chinese companies even if the government doesn't own them. This allows Chinese companies to do something called dumping. No not like that, gross. Dumping is what it's called when a company sells large amounts of something, usually a raw material like steel or wood, far below what it costs to buy in that country to force its rivals to lower prices and lose money or keep them high and lose money. A company can afford to do this if it gets lots of free money from its government. To be fair, China says we also subsidize plenty of our own companies and so does Europe. Either we give them money directly or through tax breaks. Currency manipulation. This doesn't mean that lame magic trick where someone pretends to pull a quarter out of your ear. Though it would be awesome if all Chinese economists also had to go to magic school. Currency manipulation is based on exchange rates. The exchange rate is how much of one currency you can get with another. Rich countries have really valuable money, which is why you could spend like $11 in another country and it counts as $37,000 if they're money. A government like China can try to affect the exchange rate through a complicated... you fall into sleep, haven't you? Fine. Just remember that making your own currency less valuable compared to in other countries means that when they buy stuff from you, it's cheaper than it would be otherwise. The stuff China makes is already cheap, so this makes it even harder for American companies to compete on price in the US. On the flip side, other countries complained when we stimulated our economy through the Federal Reserve after the 2008 recession. For more information on how the Fed did it, call it quantitative easing. Check out the video I made on that. Right now, China might be trying to make its currency more valuable to stop economic problems, so the manipulation could have solved itself. For stealing technology with hackers. For our younger viewers, I'm referencing a historical documentary from the 90s. It was a simpler time. Chinese hackers break into the computers at American companies and steal their ideas and technologies so they can make them for cheap but not have to spend anything on research. They can even steal marketing plans and advertising ideas. The companies can't make too big of a stink, they say, or they won't be able to sell anything at all in China. The former director of the NSA said that Chinese hackers had hit every major American company. We can only guess how much this costs American companies, but experts think it's around 300 to 400 billion dollars a year. For comparison's sake, the federal government spent 3.9 trillion in 2016. The Department of Justice thinks it's cost us more than 2 million jobs as well. The Chinese government, or Chinese companies, will also just buy companies in other countries to get their technology or to get an advantage over their rivals. On the bright side, it looks like at least the hackers who work directly for the Chinese government have slowed down since President Obama and the Chinese president signed an agreement in 2015, though no one knows how much they've slowed down or how long it will last. So what will President Trump do about this? All of these different complaints have been brought against China either at the World Trade Organization, called the WTO, or in court. The problem with the WTO is it is a voluntary thing that the US and China agreed to, so even if we win, China isn't forced to do anything. Or maybe they do something, but it doesn't fix the problem. And we don't always win. Plus, sometimes we ignore the WTO too, like when we lost a case to Brazil in 2014 about money we were paying American cotton farmers. It's the same in court cases because the country has to agree to enforce the ruling. We can seize anything that's in America, like bank accounts, but that would cause its own set of problems. China might start seizing American companies' stuff, or put up more barriers to our trade which would kill jobs. The same thing might happen if Trump slaps a big tax on Chinese imports, like he's talked about doing. Or if Congress passes a law making it harder for Chinese companies to buy American ones. Right now, the Chinese government seems to think that we need to be able to sell to them too badly to make too much of a fuss. Trump can try to negotiate a deal that both sides would agree to, since China does need to sell to us too, and they're trying to grow their technology industry. And if we block them out, they can't do that. Some experts also think that China is trying to avoid a recession, which would mean they have more reason to negotiate. The trick is whether we can figure out something that solves everyone's problems. What China has been doing so far has made them rich after all. And there you have it. As always, like and subscribe to know when new videos are coming out. If you want to make it easier to know when a new video is up, click the little bell icon next to the subscribe button so you get notifications. Our next video will cover how people pick colleges, degrees, and jobs, and if there are better ways to do that.