Its a rather complex issue. First, let me state I am all for free trade. Unfortunately trade isn't exactly fair, but thats another issue.
First off, we like Chinese goods. They're cheap (relative to domestic production) and allow us to consume more than we could otherwise. Second off, lower import costs cut expenses of American firms which helps increase output and increase our GDP. Also, as their economy grows they will eventually purchase more American goods (whether by choice or not).
In addition, since they don't want to let their currency float (aka appreciate against the dollar---which would raise cost of imports from China, and decrease how much we import, while cheapen our exports and expand our output) they only have one option. That is to purchase American (Dollar Denominated Assets---remember shortfalls in exports of goods are offset by exports of financial assets). The result is that American assets appreciate and interest rates fall (some of the reason the yield has been so "funky" in comparison to historical rates). The results is that our homes and stock prices go up. We are wealthier (at least for the time, until the "bubble" if you buy into the bubble bursts, and we have some (serious????) problems). We can then buy more. Companies can borrow for less (lower costs of capital) which results in higher level of outputs.
So are trade deficits bad. Yes and no. For the most part we ar ok, as long as foreigners continue to demand our assets. If/when they change their mids we could have some serious problems.
To answer your initial question, we could (in theory) put some pressure on China via boycotts, but its unlikely this would ever happen and reprecussions could be problematic.
First off, we like Chinese goods. They're cheap (relative to domestic production) and allow us to consume more than we could otherwise. Second off, lower import costs cut expenses of American firms which helps increase output and increase our GDP. Also, as their economy grows they will eventually purchase more American goods (whether by choice or not).
In addition, since they don't want to let their currency float (aka appreciate against the dollar---which would raise cost of imports from China, and decrease how much we import, while cheapen our exports and expand our output) they only have one option. That is to purchase American (Dollar Denominated Assets---remember shortfalls in exports of goods are offset by exports of financial assets). The result is that American assets appreciate and interest rates fall (some of the reason the yield has been so "funky" in comparison to historical rates). The results is that our homes and stock prices go up. We are wealthier (at least for the time, until the "bubble" if you buy into the bubble bursts, and we have some (serious????) problems). We can then buy more. Companies can borrow for less (lower costs of capital) which results in higher level of outputs.
So are trade deficits bad. Yes and no. For the most part we ar ok, as long as foreigners continue to demand our assets. If/when they change their mids we could have some serious problems.
To answer your initial question, we could (in theory) put some pressure on China via boycotts, but its unlikely this would ever happen and reprecussions could be problematic.
