China should call Trump’s trade bluff
US President Donald Trump added a new twist to the trade dispute on Sunday by seemingly softening his stance and tweeting: “President Xi and I will always be friends, no matter what happens with our dispute on trade. China will take down its trade barriers because it is the right thing to do…”
However, Trump has not changed his position. He has only attempted to cool down the heated war of words between the United States and China, by talking about his good relations with President Xi Jinping. But Xi remains committed to protecting global free trade.
In fact, Trump continues to bargain that “China will take down its trade barriers” and “taxes will become reciprocal and a deal will be made on intellectual property”.
For global investors, the US used to be an ideal investment destination because it offered stability and security to their assets. But the unstable leadership of Trump has put international capital in the US at risk and made investors in the US market nervous.
Trump’s tweet, along with the proposal to impose additional tariffs on $100 billion of Chinese goods, is more of a carrot-andstick game.
But there is no need to worry about the additional tariffs now, as Trump has only directed the US Trade Representative to consider whether such additional tariffs would be proper, which is different from preparing a detailed list of Chinese products for imposing additional tariffs.
As a businessman, Trump believed in frightening his “rivals” to win negotiations, which also helped him create an image of a “strong personality” among his voters. With the US mid-term election scheduled for November, it is not surprising that Trump is resorting to such old tricks.
Opinions differ on whether Trump’s $100 billion refers to the amount of tariffs to be collected or the volume of goods upon which to impose the tariffs. But considering his personality, it is highly possible that he did so to make bigger headlines.
Some media outlets have also noted that Trump’s team members gave statements different from his. Soon after Trump announced the latest tariff proposal, the US secretary of com- merce, the USTR, and the White House economist all mentioned the possibility of negotiations. According to one analysis, they were trying to pacify the markets and prevent US stock prices from falling further, but we cannot expel another possibility: that they were using different tactics to achieve the same result.
It is possible that the senior US officials seemingly softened their posture because they are optimistic about the Chinese market. So, if the Trump administration does actually impose the proposed tariffs, there will be maximum psychological pressure on the participants in the Chinese market. Trump is an old hand at playing psychological games. But he and his team are rather bad at handling trade frictions, which is good news for China.
The US’ proposed list of tariffs on $50 billion worth of Chinese imports covers about 1,300 kinds of Chinese goods. China responded by proposing tariffs on US imports worth $50 billion, but China’s list contains only 106 kinds of US goods. This means for each kind of US product on the list there are 12 kinds of Chinese goods. In other words, the US products on China’s list will suffer more than the Chinese goods on the US’ list, that is, US companies will suffer more heavily from the blow than their Chinese counterparts.
Besides, Trump released the information on additional tariffs on Chinese goods worth $100 billion on Thursday during China’s four-day Tomb Sweeping Day holiday, which lessened the pressure on Chinese stock markets.
Therefore, we can safely conclude that Trump and his team are very good at hyping up disputes but rather unprofessional at handling trade frictions. Therefore, China must firmly fight back the US’ unilateral and unfair trade moves, and should be confident of winning any trade war because truth is on its side.
Trump is an old hand at playing psychological games. But he and his team are rather bad at handling trade frictions, which is good news for China.