China can ‘roll with punches’ of US trade war
Recent Sino-US trade friction has sparked concerns over an epic trade war caused by the unilateral measures taken by the US. China has to prepare for the long term, since the conflict cannot be solved with just one strike.
US President Donald Trump signed a memorandum on March 22 targeting “China’s economic aggression.” Based on a Section 301 investigation, Chinese products may be subjected to as much as $60 billion in tariffs. Meanwhile, the US will limit mergers and investment by Chinese companies.
This will inevitably have a strong impact on China, which has been depending heavily on trade for the past 20 years. The US and China are the two major economies in the world, contributing almost half of global GDP growth in the past decade.
Although China has been the biggest target for trade protectionism measures such as anti-dumping and anti-subsidy investigations for almost 30 years, the amounts involved in this trade war initiated by the US are still quite impressive.
The categories of products involved aren’t the largest and the tariff rates applied aren’t the highest. Actually, some developing countries have imposed the most restrictive measures on Chinese products. The US intends to levy tariffs on Chinese goods covering an estimated 1,300 product lines, or about 10 percent of US imports from China.
In April 1993, Mexico imposed anti-dumping on more than 4,500 Chinese products, accounting for 75 percent of total Chinese exports to Mexico. The extraordinary duty on shoes was as high as 1,105 percent, which was unprecedented. Later, Mexico became the last obstacle of China’s entry into the WTO. China had to give consent to Mexico putting a special tariff on Chinese products until 2008 to enter the WTO.
In the long run, Sino-US trade friction means that China has to face long-term pressure of trade disputes. A tree that stands above the others will be the first to be blown down. As long as its economy continues to be outperforming, the shadow of trade disputes will hang over China. Any country, including Western countries, may pick on China.
China should have a positive attitude in dealing with the upcoming trade war, fully realizing that it is paradoxical proof of the economic accomplishments of China. China has become a target of trade war, instead of a country needing compassion and charity.
In the foreseeable future, China may face all sorts of trade disputes with the US and other countries. Therefore, it is important that China learn to live with it.
China’s expanding economy will inevitably infringe on the interests of other trade partners, even though it is not China’s intention. The US, which has held a position of political and economic hegemony for more than 70 years, will heed a rising power that can potentially challenge its position. Since China is so different from the US in every aspect, it poses an even bigger threat. Therefore, more containment and checks will be put on China.
Moreover, Trump has emphasized the reconstruction of the US real economy. Its political foundation also is deeply rooted in the real economy sectors. He is attempting to protect and fix the industrial chain in those sectors through trade protectionism. So it is certain that more trade disputes will emerge one after another, even if this one is settled by compromises on both sides.
China has the ability to retaliate, but it requires a strong will and spirit to deal with long-term threats and trade friction. A trade war is not a good thing. However, every coin has two sides. China will have to get the most out of the trade dispute.
The US has threatened to restrict investments from China and reduce visas for Chinese people, which may turn out to help China constrain its capital and brain drains. By rolling with the punches, China can turn bad into good.
By rolling with the punches, China can turn bad into good.