China taxes

Today President Xi of China is in a big meeting in Davos preaching the Milton Friedman doctrine of free trade but he doesn’t mention that for years China manipulated their currency and to this day China taxes imports. The result is as follows: China is currently our largest goods trading partner with $598 billion in total (two way) goods trade during 2015. Goods exports totaled $116 billion; goods imports totaled $482 billion. The U.S. goods trade deficit with China was $366 billion in 2015. Friedman’s ideas on trade make sense but only when there is a level playing field and this does not exist between China and the US. China taxes many imports with an import tax but they also have a value added tax on all commerce including imports. This raises the prices of imported American goods and makes them less competitive. The low cost of goods imported from China is the result of cheap labor and other financial manipulations. The labor part is 40% and the other is 60%. The US cannot do much about the labor cost but can affect the other costs.