Trade war with US unlikely despite ongoing friction
Recently, the US has been putting pressure on China over trade. For the first time since 1991, the US Department of Commerce launched “self-initiated” antidumping and countervailing investigations into imports of alloy aluminum sheets from China. And in late November, the US told the WTO it refused to recognize China as a market economy. Some media reports and scholars have said a trade war between China and the US is coming.
Although the US has taken some dubious measures, it is an exaggeration to say that there will be a trade war. The bilateral economic ties between the two countries are too strong to break. According to statistics from the General Administration of Customs, China’s trade volume with the US reached $3.21 trillion in the first 10 months this year, an increase of 17.2 percent over the same period in the previous year. Drastic measures would have to be taken by both sides to start a trade war, and it is highly unlikely this will happen.
The US anti-dumping investigations and rejection of China’s market economy status sound more aggressive than they actually are. The total amount of goods involved in the recent investigation are worth just over $600 million, while the annual trade volume between China and the US is around $4 trillion. The total amount involved in foreign trade friction is $18 billion, accounting for less than 0.5 percent of the overall trade volume. The investigation is an extension of the US trend toward trade protectionism rather than a sign of a deliberate trade conflict.
Moreover, as the investigations were initiated by the US Department of Commerce – rather than being launched after a request for a probe by US firms in the aluminum industry – it is more likely that the case might not lead to punitive measures.
The US appears to be trying to create a particular situation with these meticulously planned measures. On the one hand, US President Donald Trump has to behave aggressively to demonstrate the determination to protect US jobs and the manufacturing industry. But on the other hand, he wants to avoid causing too much damage to trade with China. Therefore, China needs to take a position – it should not encourage protectionism, but should also avoid overreacting to the US measures.
It should be pointed out that trade protectionism never works in the long run. The US is trying to eliminate its trade deficit by picking on other countries instead of solving its own internal problems. Some of its industries are obsolete and need to be rejuvenated because of globalization and automation, coupled with the effects of the subprime mortgage crisis. The US should focus on reconstructing its own industries rather than engaging in trade protectionism.
Trade between China and the US will continue to expand, regardless of bumps in the road. Despite the eye-catching nature of the trade friction, it is important for China to focus on the facts. Under Trump’s administration, the external environment for US-China trade has actually been improving. Before Trump’s China trip, White House Chief of Staff John Kelly stated in an interview that China has “a system of government that has apparently worked for the Chinese people.”
Trump also offered good wishes for the successful conclusion of the 19th National Congress of the Communist Party of China. It seems that the Trump administration is putting a peaceful evolution strategy in place.
In response, China should also focus on its own affairs. The pace of its development should not be affected by other countries. China should pay more attention to promoting its national strength, rather than focusing on trade disputes that will not fundamentally shake the overall trade relationship between China and the US.