This article caught my eye for a couple of reasons. I recalled taking both Macro and Micro Economics with Professor Bajrami at Alameda College a few years ago. During her lectures, Professor Bajrami had told us that China was the G20 leader and that it would be wise to learn Mandarin in the near future. Almost everything that I own was actually made in China. Since half of my ancestors were from China, it’s good to know that they are doing quite well for themselves, even though I don’t agree with the government in China. The main idea of this article is about the ongoing trade wars between US and China.
Since becoming the world’s second biggest economy as the largest exporter, China has been keeping its currency, yuan, relatively low in order to gain trade advantage. US responded by imposing tariffs on Chinese imports to the US. Just recently, China decided that it’s not going to exports its rare earth minerals to the US and Europe. As a result, Molycorp and US Rare Earths are scheduled to set up mining facilities in the US. There are enough resources in US that it doesn’t need to rely on China’s imports, but when production costs and time are taking into considerations US knows that China is a better alternative.
The article relates to everything I have learned in the class so far. Some argued why US are importing goods from China when we could produce at home. The main reason is that China has a lower labor costs so that the production costs for the US would be a lot cheaper than producing the goods at home. Since US are imposing tariffs on Chinese imports, the tariffs will cause the domestic price to rise above the world price. This will result in a fall on imports. There will be a decrease in consumer surplus because the consumers are paying more and consuming less.
The Essay on Cost Of Goods Sold
A figure of cost of goods sold reflecting the cost of the product or good that a company sells to generate revenue, appearing on the income statement, as an expense. Also, referred to as "cost of sales." It is essentially a cost of doing business, such as the amount paid to purchase raw materials in order to manufacture them into finished goods. For example, if a $10 widget costs $6 to make, then ...
Also, the producer surplus will see an increase. China is keeping the yuan undervalued by pegging it to the dollar in order to gain export advantage. US proposed that Chinese yuan need to be appreciated to level out the US trade deficit with China (this is where we would have a decrease in “e” or a rise in the value of the yuan).
In this case, there is an excess supply of yuan that cause the value of the yuan to depreciate. When the yuan depreciates, the trade deficit will fall causing the supply and demand into equilibrium.
