Hi, I understand the general consensus among economists is that the US trade deficit is a function of its savings relative to consumption & investment (private & public), and so long as savings remain low relative to consumption (which may increase due to the corporate tax cuts), the overall US trade deficit will not fall, and may even rise, notwithstanding the tariffs that specifically target China. This implies that the US trade deficit with China falls (due to China specific tariffs), the trade deficit with other countries (e.g., Vietnam, Japan) will rise.



On the other hand, China's overall trade surplus will remain the same without any change to China's savings relative to consumption & investment. Suppose this is the case, then any fall in China's surplus with the US will be accompanied by a rise in China's trade surplus with other countries (e.g., Vietnam, Japan). Correct?



That said, I understand that China's savings relative to consumption & investment is projected to fall over the long-term. So over time, China's trade surplus will fall, or even become negative. But this outcome will have nothing to do with the US tariffs.



It's best that China continues to focus on its own development, and ignore US attempts (even if successful) to stall China's development. In this regard, even less than proportionate response to US tariffs may be the optimal response.