US tariff measures may boomerang
Editor’s note: The United States proposed to impose additional 10 percent tariffs on $200 billion worth of Chinese goods on Tuesday and thus expanded the tariff war he launched by imposing 25 percent tariff on $34 billion of Chinese imports on July 6. How should China deal with the US “trade terrorism”? Three experts share their views on the issue with China Daily’s Liu Jianna. Excerpts follow:
Beijing is left with no choice but to fight back
The Donald Trump administration fired the first shot in the tariff war against China last week, prompting China to take retaliatory action. During the recent China-US negotiations to resolve the bilateral trade disputes, Beijing showed utmost sincerity to settle the issue. Yet the US sabotaged the negotiations, by making requests that China could never agree to.
Given an inch, the US has always demanded a yard.
Now that the US has declared a tariff war, China has no choice but to fight back, especially because the unreasonable demands and targets the US has raised for China to fulfill make it impossible for the two sides to reach an agreement.
Standing on the side of justice, China is confident of dealing with the tariff war. And that Trump’s protectionist and unilateral moves are being criticized by the rest of the world, as seen during his Europe visit, is proof he is on the wrong side.
Yet China is unwilling to be drawn into a trade war. It has the capability to defend its rights and interests, but it also knows negoti- ations are the best way to resolve trade disputes and a trade war will leave no side unscathed. So the US should show more sincerity in settling the trade disputes through talks.
China should stick to its path of opening-up
Trump has said the tariffs will “encourage China to change the unfair practices identified in the Section 301 action with respect to technology and innovation”. But the investigation under Section 301 of the US Trade Act of 1974 has violated World Trade Organization rules.
Article 1 of the General Agreement on Tariff and Trade on general most-favored nation treatment is the cornerstone of WTO rules and the multilateral trading system established after World War II. It says that no WTO member should offer “treatment no less favorable than” that given to third parties, which means WTO members should not discriminate against each other.
The US’ discriminatory actions against China not only harm China’s interests under the WTO framework but also violate WTO rules. So if China doesn’t respond in kind, it would put its interests as well as those of other WTO members at risk.
But it is more important that China sticks to its path of reform and opening-up. It should not allow the tariff war to disturb its plan to further open up its economy, although it has to take potent measures to counter the US’ provocative actions.
Also, China should fully implement the recently published negative list for foreign investment, as the inflow of foreign capital would help China cope with the aftereffects of the tariff war. And foreign capital that continues to have faith in China’s economy in these tough times is bound to gain significantly from the growth of the Chinese market in the long run.
Another way to meet the challenge is through deepening reform among which building and perfecting a fair environment for competition should be given priority. Since the tariff war could leave many private enterprises facing a life-and-death battle, they should be given special attention, as they have contributed a lot to the growth of the Chinese economy.
It is important therefore for China to take a firm stand against the US’ hegemonic moves on the one hand and deepen reform and opening-up on the other to deal with the tariff war. China should also expedite bilateral and multilateral trade negotiations to facilitate the making of new trade rules that are potent, binding on all parties and promote the multilateral trading system.
Impact on Chinese economy manageable
US President Donald Trump has launched a tariff war not only against China but also against some other economies and threatened to undermine the multilateral trading system. Apart from China, quite a few other economies have also taken countermeasures to Trump’s unilateral and protectionist moves. For instance, Russia plans to impose 25-40 percent tariff on US industrial goods, including equipment for road construction, oil and gas, and mining in response to the US tariffs on Russian metals.
And France has warned the US that Europe will unite to retaliate against the US tariffs. As Chinese philosopher Mencius said, a just cause enjoys abundant support while an unjust cause finds little.
Nevertheless, despite being on the side of justice, China may not be immune to the destructive impact of the US tariff war, as the Sino-US trade conflict would undermine the global supply chain and eventually hurt consumers both in China and the US.
Yet for now the impact of US tariff on China’s economy is largely manageable as it accounts for a relatively small part of the total value of bilateral trade, which was $584 billion last year. Besides, the impact of the tariff war, to a certain extent, will extend to foreign enterprises because 59.6 percent of the Chinese goods targeted in the US tariff list are made by foreign enterprises including some US companies. In other words, other economies, including the US itself and its allies such as the European Union, Japan and Canada, may have to bear the brunt of the US tariff war against China.
The spillover of the tariff war aside, the Trump administration may be more concerned about how many manufacturing jobs will return to the US. But US enterprises focus more on practical business issues such as market demand and production cost. That Harley-Davidson has decided to move part of its operations overseas in response to the EU imposing additional tariff on US goods explains the concerns of some US companies. As much as Trump hopes, US manufacturers may take action contrary to his wishful thinking.
This shows the US has started a tariff war that may harm other economies but won’t benefit the US either. Hopefully, Trump will realize that the tariff war cannot “make America great again”, instead it would isolate the US in the international community like never before.
Apart from China, quite a few other economies have also taken countermeasures to Trump’s unilateral and protectionist moves.