China's inflation and impact on United States trade relations

¶ … International Trade. There are two references used for this paper.

The United States currently maintains a moderate trade relationship with China. It is important to look at potential positive and negative effects of increased trade, and what the current state of uncertain long-term relations with the Chinese government could have on United States firms and the United States economy.

Inflation in China

China exports have had a major impact on keeping the price of goods down throughout the world for the past decade. However, as noted on the "opening day of China's biggest trade fair, the common refrain was that prices of everything from rice to steel were rising sharply, and that prices for exports to the United States, Europe and other markets would have to follow (Bradsher, 2004)."

The increase in steel prices is already having a negative effect on some United States businesses as evidenced when "an exporter of exhaust manifolds, brake drums and suspension parts to American repair garages raised prices by 10% in several increments since December (Bradsher, 2004)." While some exports have not yet increased prices, they concede they will have to in the very near future.

Some large companies, such as Wal-Mart, should not be as adversely affected since they "have a considerable ability for force sellers to hold down price increases (Bradsher, 2004)." positive aspect is "exports from China to the United States last year were only equal in value to 1.2% of the goods and services produced within the United States (Bradsher, 2004)."

However, any increased trade with China could ultimately result in higher prices for United States firms and consumers, further affecting a crippled United States economy.

Conclusion

China's current inflation rates, as well as its government's relationship with the United States, can have a potential negative effect on the United States economy. It is important for businesses to keep informed of the constantly changing economy in China in order to survive any future economic crisis.