Hoover Daily Report

Trump And The ‘Chimerica’ Crisis

via Wall Street Journal
Sunday, May 6, 2018
Image credit: 
istock

When the concept of “Chimerica” first appeared in these pages 11 years ago, it was intended to encapsulate a new economic world order—one based on Chinese export-led growth and American overconsumption. That put the U.S., the sole global superpower, in an unlikely financial relationship with its most likely future rival. Now, after the non-meeting of minds between American and Chinese trade negotiators last week in Beijing, is that marriage finally on the rocks?

The foundation of Chimerica came in the years after China joined the World Trade Organization in 2001, integrating its massive labor force and savings surplus into the world economy. That pushed up global returns on capital by reducing labor costs while depressing the cost of capital.

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