The US trade deficit with China ‘will reverse’ in the long term, Alibaba co-founder says

Finance news

Alibaba co-founder Joseph Tsai told CNBC on Tuesday that the “structural issue” of the United States’ trade gap with China will reverse itself as the Chinese ramp up imports.

The trade deficit will shrink once the Chinese government begins purchasing $40 trillion worth of goods as promised over the next 15 years, he said. Even though President Donald Trump placed tariffs on imports in part to close the deficit, China’s surplus topped $323 billion in 2018, the highest since 2006.

“With regards to the trade war, I would say this … if you look at the long term, the trade deficit itself will reverse,” he said on “Closing Bell.” “I talk about [the] 300 million middle-class consumers that will continue to buy more from all over the world.”

China’s economy is being powered by consumers, he said, and the Chinese middle-class consumer base could nearly triple by 2030. Tsai said there is a “symbiotic relationship” between American businesses with ties to China and vice versa.

Alibaba, the online marketplace in China, has been cashing in on the industry where last quarter it outgrew total e-commerce by “several percentage points,” Tsai said. He pointed out that the platform carries a number of U.S. imports, such as juice from Ocean Spray and apples from Washington state. Last November, the executive chairman warned that a full-blown trade war between the countries would hurt many U.S. businesses that have ties to China.

The U.S. has tariffs on $250 billion worth of Chinese goods, while China has targeted duties on $110 billion worth of imports.

U.S. officials have indicated that negotiations have been productive but that a number of issues still need to be worked out.

Trump signaled on Tuesday that he would consider delaying his promise to hike tariffs on $200 billion worth of goods if a trade deal is not yet reached.

“We’re always glass half full. We’re in business, so we always hope for a benign environment,” Tsai said. “We remain optimistic that there’s going to be a resolution at some point.”

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