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Donald Trump is causing the US to fall behind China in tech, economist says

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Donald Trump is causing the US to fall behind China in tech, economist says
  • President Donald Trump's economic policies are causing the U.S. to fall behind China in technology, one economist claims.
  • Steen Jakobsen, chief economist at Saxo Bank, said Trump needs to focus on the next generation of jobs rather than preserving existing ones.
  • The U.S. administration has previously criticized China's approach to technology development.
Arjun Kharpal | @ArjunKharpal
Published 2 Hours AgoCNBC.com

President Donald Trump's economic policies are causing the U.S. to fall behind China in the tech sector, according to a Saxo Bank analyst, who said the current government does not have the "ability of seeing the world changing."

Steen Jakobsen, chief economist at Saxo Bank, said much of the policy that Trump has enacted or talked about is "negative" and "actually against productivity."

He cited Trump's desire to reduce the U.S. trade deficit, saying that it would not be good for the average American.


"If you have a current account deficit, you are spending more money than you have. If you want a surplus you going to spend less money than you can... So if Trump actually delivers on the trade policy, he will make Americans worse off first before they get better. And in terms of productivity he wants to keep jobs, he doesn't want to create jobs," Jakobsen told CNBC in a TV interview Thursday.

"And I think that is the big change we see relatively to China who has a research and development plan. China today, on a weekly basis, almost overtakes the U.S. in different technology sections."

Saxo Bank's chief economist said China is advancing in areas like quantum computing. This refers to a new era of faster and more powerful computers. In August, China demonstrated a world first by sending data over long distances and using satellites that was potentially unhackable. It laid the basis for next generation encryption based on so-called "quantum cryptography."

US 'missing out'
In contrast to the U.S., China has a plan to develop in the technology field, according to Jakobsen.

"They have electrification. And I think electrification is the single biggest thing that's ever happened. U.S. has no policy, Germany has no policy, but China moves along," he said.

"I think the U.S. is missing out on a huge, huge ability of seeing the world changing. I think in the next 10,000 data points, we will have more change than we have ever seen in our... careers."

China has laid out plans to become a leading player in many areas of technology. In July, the government unveiled its blueprint to become the world leader in artificial intelligence (AI) by 2030, with the aim of making the industry worth 1 trillion yuan ($147.7 billion). Another initiative, called "Made in China 2025," is China's massive government-backed push to be a world leader in a number of high-tech industries, such as medical devices, aerospace equipment and robotics.

Wilbur Ross, the U.S. commerce secretary, has criticized the Chinese government's approach to technology.

"Rather than building a globally competitive free market economy in order to compete, China has chosen instead to compel American companies that want to operate in China to turn over proprietary technology and intellectual property," Ross wrote in a column in the Financial Times earlier this year.

He said that for U.S. companies to get into China, it requires a joint venture with a Chinese firm and sometimes means the transfer of intellectual property.

US tech firms could lose lead
But Jakobsen said that the U.S. administration needs to focus on education, creating new jobs rather than preserving existing ones, and increasing spending technology research.

"So the issue in the U.S. is not about keeping jobs, it's about how next generation of jobs are being created. And they will come through electrification, from leading the mechanical engineering that will come from it," Jakobsen told CNBC.

U.S. technology companies have been investing heavily in areas such as artificial intelligence and robotics. Much of Google's new Pixel 2 smartphone announcement Wednesday focused on this, for example.

But while U.S. technology firms are leading the way now, Jakobsen said that could change in the future, partly because many of these companies aren't able to access the Chinese market.

"They have the leadership. But if you look 10 years down the road, does Google have a footprint in China? No. Do they have the ability to change that? Probably not," he told CNBC.

"So the point is yes, they (U.S. tech firms) are very, very successful, they have very high profit margins in my opinion because they have monopolies... (but) if you look down the line... there will be a Chinese version of this inside the next zero to six months."

https://www.cnbc.com/2017/10/05/don...ng-us-to-fall-behind-china-in-technology.html
 
Exactly. The man has been POTUS only eight months and people are already pinning the collapse of US tech sector on him. It's just possible that China is simply catching up to US and not the other way around?

Right, it is to be expected.
The west dont seem to know that orientals are known for traits like, hard work, pragmatic, efficient.

Most of all they dont care about petty mundane issues like someone interfered in the election.

US only have themselves to blame as it is their choice to outsource manufacturing to mexico, china, service industry to India in the mid 90s
 
Trump might just greatly accelerate what's been happening since at least mid 90's--export of US jobs abroad. Or he just might bring the manufacturing back to America, reduce foreign-origin workforce in America. His inclination is to the latter direction--if he's allowed to.
Anyway, the Chinese Miracle--and it's a miracle unmatched in human history--is bound to continue, even if at a slower pace.
PS. It's a different topic as to how now Chinese and other north-east Asians are starting to look very smart and rich.
 
Trump might just greatly accelerate what's been happening since at least mid 90's--export of US jobs abroad. Or he just might bring the manufacturing back to America, reduce foreign-origin workforce in America. His inclination is to the latter direction--if he's allowed to.
Anyway, the Chinese Miracle--and it's a miracle unmatched in human history--is bound to continue, even if at a slower pace.
PS. It's a different topic as to how now Chinese and other north-east Asians are starting to look very smart and rich.

Excellent post!

The biggest threat to manufacturing in US is not foreign competition, especially in area of low-wage workers, but it's technology and automation. It's mind-boggling what advances in AI and machine-learning are doing to manufacturing and service jobs. This is the biggest threat; and Trump can't do anything about it.

Yes, China's growth has been impressive and will continue to do so, but even they are not immune to advance of technology. Technology is a global threat to everybody, including the developing world.
 
High PISA test result, very big market, right policies and generally well-educated workforce are all available now in China. These factors contribute to the emerging of tech giants in China. Trumps or any president of the US cannot stop this trend.
 
Trump might just greatly accelerate what's been happening since at least mid 90's--export of US jobs abroad. Or he just might bring the manufacturing back to America, reduce foreign-origin workforce in America. His inclination is to the latter direction--if he's allowed to.
Anyway, the Chinese Miracle--and it's a miracle unmatched in human history--is bound to continue, even if at a slower pace.
PS. It's a different topic as to how now Chinese and other north-east Asians are starting to look very smart and rich.

We aren't going to bring back most of the manufacturing because it is too polluting. We have to live here for multiple lifetimes and it isn't being helped when we poison our land and water so somebody on the other side of the planet can paint their house a nice shade of blue or wear some leather sneakers for two years max. The offshoring was for a reason. We still have toxic superfund sites to remind us of when we led the world in manufacturing.

Read about some in my area:
https://cumulis.epa.gov/supercpad/S...fuseaction=second.Cleanup&id=0100948#bkground

One was so bad they made it into a movie
https://en.wikipedia.org/wiki/A_Civil_Action
The one chemical ( https://en.wikipedia.org/wiki/Trichloroethylene ) in this one is in 852 superfund sites. That's just one chemical!

Read the above two and then multiply it by a few thousand and you can see why widespread manufacturing will never happen here again.
Unfortunately the solution was to move manufacturing to countries which could care less about creating a toxic landscape. They think they are moving up but in reality they are going down. Any kind of pre-industrial human pollution they had generated for eons will be a microdot compared to a short few decades of today's industrial pollution.

When we switch to electric cars and fusion power we will be in great shape.
 
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Unfortunately the solution was to move manufacturing to countries which could care less about creating a toxic landscape. They think they are moving up but in reality they are going down. Any kind of pre-industrial human pollution they had generated for eons will be a microdot compared to a short few decades of today's industrial pollution.

When we switch to electric cars and fusion power we will be in great shape.

Good post, as usual, defending America in a subtle and humble way, my friend. But I dont think outsourcing was done for American environment, if that was your drift. From my memories from late 90s onward--the idea in America seemed like: We would be a knowledge economy while others provide the tools for us.
 
Good post, as usual, defending America in a subtle and humble way, my friend. But I dont think outsourcing was done for American environment, if that was your drift. From my memories from late 90s onward--the idea in America seemed like: We would be a knowledge economy while others provide the tools for us.

1990's?? This is something that started in the 1970's. All the Clean Air, Clean Water Act (1972), Safe Drinking Water Act (1974) started gaining HUGE popularity after a shocking 1971 "Keep America Beautiful" commercial on TV showed how massive industrialization to supply the world with goods was destroying the US environmentally. People got incredibly angry (at being in the dark about the severity of the situation) and companies started getting sued and were forced to implement expensive/impossible solutions to meet the new laws. It was far more profitable to simply offshore it. Remember Nixon went straight to China in 1972 to suddenly open up trade. It was basically an offshoring scouting trip. What exactly was the US planning on selling Chinese consumers in 1972 when the average wage there was minuscule? (That's like Trump announcing a trade deal with a poor African country like Sierre Leone). China was more than happy to solve our pollution issues by opening up factories and putting their people to work.

In 1980 the Superfund was created to start cleaning up the worst of the worst sites. It is still cleaning up some of those sites 37 years later after spending 10's of Billions. Some companies paid fines while others simply declared bankrupcy.

The only way to bring back intensive manufacturing is to roll back the Clean Air and Clean Water Acts. Trump is attempting to do that but I'm pretty sure the majority of Americans support these Acts and he won't get far.

The days of thousands of companies dumping chemical waste into rivers (leading to drinking water supplies downstream), land (polluting ground water), and soot from smokestacks as a byproduct of manufacturing some item (which a person on the other side of the planet uses for maybe two years) are gone. It won't be coming back. Robot automation doesn't solve any of this either.
 
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Good post, as usual, defending America in a subtle and humble way, my friend. But I dont think outsourcing was done for American environment, if that was your drift. From my memories from late 90s onward--the idea in America seemed like: We would be a knowledge economy while others provide the tools for us.

US cumulative investment in China is minuscule (somewhere over 200 billion, if I am not mistaken) over the past three decades. A large portion of investment into China has come from the Northeast Asian region, led by Greater China (Taiwan, Hong Kong) and Japan, Korea and Singapore.

So, I do not know where the US outsourced its production, but it was definitely not to China in any overwhelming way.
 
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