US Reliance on the World To Escape an Economic Crisis

Recently, the Bureau of Economic Analysis of the U.S. Department of Commerce released data that the U.S. annual gross domestic product shrank by 3.5% in 2020. This is a greater magnitude than the impact of the 2009 financial crisis on the American economy. Except for government spending and the real estate market, almost all sectors of the economy are experiencing a recession. Consumer spending, which accounts for over two-thirds of GDP, fell by 3.9%, a record since 1932. The unemployment rate reached a staggering 14.7% in April and has since declined, but it was still as high as 6.7% in December. The COVID-19 pandemic has caused the American economy to lose 9 million jobs, with an average unemployment rate of 8.1%.

An important reason behind the U.S. economy’s drop to its current position is the policies of the previous administration. Donald Trump spent a lot of time during his presidency competing with the outside world and “stirring the pot,” which delayed large-scale investment in health care, education, scientific research and reform of the domestic distribution system. In the end, four years of the empty slogan “Make America Great Again” left behind a poverty rate that broke a 50-year record, an increase of 8 million people entering poverty in the second half of 2020 and a highly polarized and divided society. When Trump ran for president in 2016, he promised to significantly reduce the trade deficit following his election, but by the end of his term, the U.S. trade deficit was $645.2 billion, an increase of $142.9 billion from 2016.

Now the outside world hopes that Joe Biden can correct the policies of his predecessor, but it is still unknown whether the new administration can extract the American economy from the quagmire of the COVID-19 crisis. The Biden administration must race against the pandemic’s spread and the mutation of the virus. When Biden took office in the White House, however, he found that the COVID-19 data left by his predecessor was incomplete and that domestic vaccination research and development were seriously lagging. Biden has proposed an enormous economic stimulus plan, but there are still doubts about whether this can be quickly and successfully launched. Although the Democrats won both houses of Congress, they still have little control over the Senate and long debates may obstruct legislation. The scale of Biden’s stimulus plan may ultimately shrink and the time frame might be delayed.

On Feb. 8, the Senate will launch an impeachment trial for Trump. Looking at the historical duration of presidential impeachment cases, the shortest was Trump’s first impeachment trial, which took 49 days; the longest was Andrew Jackson’s impeachment trial, which took 91 days. The impeachment case will distract from Biden’s plans, which may not be approved by Congress until April. The U.S. economy, which has not been able to wait for the stimulus plan to land, may experience major fluctuations in the stock and bond markets.

In addition to continuing to seek congressional approval of the economic stimulus plan, another important mission for the Biden administration will be to repair relations with the international community, including China, in order to push the American economy out of crisis as soon as possible. The U.S. should join hands with the international community to fight the pandemic and reduce barriers to international trade and investment, as well as to promote globalization. A study jointly issued by the U.S.-China Business Council and Oxford Economics shows that U.S. exports to China provide 1.2 million jobs for the U.S. market, and only the gradual abolition of tariffs and the promotion of bilateral trade will create 145,000 jobs for the U.S. in the next five years. In the next 10 years, China’s development will drive one-third of global economic growth and China will become an important engine for the world economy. Therefore, strengthening economic and trade cooperation between China and the U.S. is not only a rational and realistic option for the Biden administration in the short term, but will also be a way to promote mutual economic prosperity.

The author is a visiting researcher at the Center for International Security and Strategy at Tsinghua University and a senior researcher at the China Construction Bank Research Academy.