When Will the China-u.s. Trade War End?

If the U. S. con­tin­ues to ig­nore the great com­mon in­ter­ests of the two coun­tries and tear apart deeply in­ter­con­nected and em­bed­ded bi­lat­eral power puls­ing through a net­work built by both sides over many years, both sides will end up as losers, and the fun

China Pictorial (English) - - Contents - Text by Xu Feib­iao

Since the be­gin­ning of this year, the U. S. has uni­lat­er­ally launched sev­eral rounds of un­pro­voked trade sanc­tions against China. The trade war be­tween the world’s two largest economies, with to­tal eco­nomic vol­ume of about 40 per­cent of the global econ­omy, has in­evitably im­pacted the whole world. When will it end? What is the most rea­son­able so­lu­tion? Such ques­tions de­mand global at­ten­tion.

Di­min­ish­ing Global Sup­port for Pro­tec­tion­ism

Dis­re­gard­ing over­whelm­ing in­ter­na­tional and do­mes­tic op­po­si­tion, the U. S. gov­ern­ment re­cently an­nounced a de­ci­sion to im­pose ad­di­tional 10-per­cent tar­iffs on 200 bil­lion U. S. dol­lars of Chi­nese prod­ucts start­ing from Septem­ber 24. Fur­ther­more, the tar­iff rate will in­crease to 25 per­cent in Jan­uary 2019, and U. S. Pres­i­dent Don­ald Trump has even threat­ened to im­pose 25-per­cent tar­iffs on the re­main­ing US$267 bil­lion worth of im­ports if China re­tal­i­ates.

The bul­ly­ing at­ti­tude of the Amer­i­can side is glar­ing. Trump claimed that im­pos­ing tar­iffs on Chi­nese goods would pro­tect the in­ter­ests of the Amer­i­can peo­ple, but his sopho­moric grasp of the global econ­omy and strong- arm tac­tics will not help Amer­i­cans what­so­ever.

On Septem­ber 24, China pub­lished a white pa­per to clar­ify the de­tails on China-u. S. eco­nomic and trade re­la­tions which ac­cused the Trump ad­min­is­tra­tion of “trade bul­ly­ism prac­tices” and sought rea­son­able so­lu­tions. How­ever, it seems the Trump ad­min­is­tra­tion con­tin­ues to ig­nore the ba­sic facts re­lated to China-u. S. trade re­la­tions as well as pub­lic opin­ion and act ar­bi­trar­ily.

So far, the Trump ad­min­is­tra­tion’s strat­egy has been ob­vi­ous. Trump has re­peat­edly torn up agree­ments reached by the two coun­tries in fa­vor of con­stantly adding more pres­sure on China. This rou­tine does not seek to elim­i­nate bi­lat­eral trade deficits and change what he con­sid­ers China’s “un­fair trade prac­tices”— he has ul­te­rior mo­tives.

In the short term, through eye- catch­ing and un­prece­dented trade pro­tec­tion­ism mea­sures, the Trump ad­min­is­tra­tion seeks po­lit­i­cal cap­i­tal ahead of the up­com­ing midterm elec­tions to solve do­mes­tic po­lit­i­cal prob­lems and lay the ground­work for the 2020 pres­i­den­tial elec­tion.

For the long run, the Trump ad­min­is­tra­tion in­tends to re­shape the U. S.-led in­ter­na­tional eco­nomic and trade or­der, sup­press China’s mo­men­tum of devel­op­ment and main­tain U. S. global hege­mony on the ba­sis of the re­al­ist prin­ci­ples of “Amer­ica First” and “Make Amer­ica rica Great Again.”

Truce Un­likely Any Time Soon oon

The Trump ad­min­is­tra­tion has as de­clared that it is presently un­will­lling to ne­go­ti­ate with China. Trump mp seems to have ben­e­fited much from om his baf­fling work. The do­mes­tic econ­omy grew strongly, and the un­em­ploy­ment rate dropped to a half- cen­tury low. With con­tin­ued d in­ter­na­tional cap­i­tal in­flows, the U. S. stock mar­ket has climbed to his­toric highs. And the lat­est polls ls showed his ap­proval rat­ing ris­ing g to nearly 50 per­cent, sur­pass­ing Obama’s dur­ing the same pe­riod in his pres­i­dency.

Con­se­quently, he has lit­tle mo­ti­va­tion to seek a truce un­til the “ben­e­fits” of the trade war are re ex­hausted. In ad­di­tion, Trump’s neo-mer­can­til­ism eco­nomic poli- cies and hawk­ish al­lies also ev­i­dence nce the “bel­liger­ent” na­ture of the U. . S. ad­min­is­tra­tion, so they will not call off the trade war un­til they get what hat they ex­pected.

Trump be­lieves that the U. S. holds a big­ger stack and more ad­van­tages in this game. Com­pared red to China’s slow­ing- down econ­omy, my, the U. S. one seems to see strong

growth mo­men­tum. More­over, U. S.- China eco­nomic and trade de­pen­dence is not bal­anced, so he be­lieves that the U. S. can “eas­ily win” the trade war with China.

Fac­ing the “trade bul­ly­ism” of the U. S., China def­i­nitely will not give in to ev­ery de­mand. In mod­ern times, there is no prece­dent for China com­pro­mis­ing due to ex­ter­nal stress and un­fair­ness. China has said that it will take ac­tive con­sid­er­a­tion to im­prove the China-u. S. trade im­bal­ance, but over­all, the dif­fer­ences be­tween the de­mands of the two sides are still huge, so it would be dif­fi­cult to reach a com­pro­mise in the short term.

In fact, the trade war is a bar­gain­ing tool and an ex­ten­sion of ne­go­ti­a­tions. In ad­di­tion, con­sid­er­ing the up­com­ing midterm elec­tions and Trump’s deep do­mes­tic po­lit­i­cal tur­moil such as the “Rus­sia probe” drag­ging him down, he will not eas­ily give up the pow­er­ful ma­nip­u­la­tive tool of the trade war to sway pub­lic opin­ion. There­fore, a China-u. S. trade truce is un­likely to hap­pen this year.

Deep In­ter­con­nec­tion to Bi­lat­eral Break­down

Since China’s re­form and open­ing up, the eco­nomic and trade ties be­tween the two coun­tries have been con­stantly strength­ened. In 2017, the to­tal trade vol­ume be­tween China and the U. S. reached nearly US$600 bil­lion. China has be­come the largest ex­port mar­ket of the U. S. out­side North Amer­ica. Var­i­ous U. S.-pro­duced goods are sold to China, in­clud­ing 62 per­cent of the coun­try’s soy­beans, 14 per­cent of cot­ton, 25 per­cent of Boe­ing planes, 17 per­cent of au­to­mo­biles and 15 per­cent of in­te­grated cir­cuits ( IC). At the same time, China’s high- qual­ity and low- cost prod­ucts have also be­come im­por­tant parts of daily lives of or­di­nary Amer­i­cans, en­abling them to en­joy an af­flu­ent life while re­duc­ing liv­ing costs.

It should also be noted that China is the largest holder of U. S. trea­suries, with more than US$3 tril­lion worth of for­eign ex­change re­serves, most of which is held in U. S. dol­lars, greatly sup­port­ing the U. S. dol­lar global sys­tem.

More­over, China and the U. S. have formed a com­pli­cated and in­ter­twined re­la­tion­ship in the world’s in­dus­trial sup­ply and value chains. As a cen­ter of the global pro­duc­tion net­work, China is an ir­re­place­able sup­plier to many Amer­i­can in­dus­tries. When the sup­ply chains are de­stroyed, the sur­vival of many Amer­i­can en­ter­prises will be threat­ened, lead­ing to in­dus­trial de­pres­sion and mass un­em­ploy­ment.

There­fore, if the U. S. con­tin­ues to ig­nore the great com­mon in­ter­ests of the two coun­tries and tear apart the deeply in­ter­con­nected and em­bed­ded co­op­er­a­tion mech­a­nism built by the two sides over many years, it will even­tu­ally re­sult in steep losses on both sides and hurt the fun­da­men­tal in­ter­ests of the U. S.

How long the trade war will last de­pends on many fac­tors, in­clud­ing the progress of ne­go­ti­a­tions, the eco­nomic devel­op­ment sit­u­a­tions of China and the U. S., and the do­mes­tic po­lit­i­cal devel­op­ment sit­u­a­tions of the two coun­tries. If the ex­ten­sion of the trade war hurts the eco­nomic growth and sta­bil­ity of the U. S., and its neg­a­tive im­pact is widely felt by the Amer­i­can peo­ple and af­fects pub­lic opin­ion, the U. S. gov­ern­ment will ac­tively con­sider a com­pro­mise and pro­pose a truce.

There­fore, the end of the trade war de­pends on the ar­rival of the cost-ben­e­fit tip­ping point of the U. S. wag­ing the trade war. If tar­iffs con­tinue to be levied to the point that the po­lit­i­cal and eco­nomic costs and losses of the U. S. out­weigh its gains, both sides will con­sider a truce; oth­er­wise the trade war will con­tinue.

For now, we can ex­pect 20192020 to be a crit­i­cal pe­riod for the trade war. Be­cause the U. S. midterm elec­tions will be over by that time, Trump’s po­lit­i­cal mo­ti­va­tion to con­tinue to ma­nip­u­late via the trade war will de­cline. More­over, con­tin­u­ing to play with fire is quite likely to have a neg­a­tive im­pact on pub­lic opin­ion, which is not wise for the lead-up to the fol­low­ing pres­i­den­tial elec­tion.

This will also be a crit­i­cal pe­riod for U. S. eco­nomic growth. The short-term div­i­dends of Trump’s new fis­cal, trade and fi­nan­cial poli­cies will grad­u­ally be ex­hausted, and the struc­tural fac­tors that limit eco­nomic growth and the neg­a­tive ef­fects of the trade war will be­gin to emerge. The U. S. econ­omy is likely to reach a peak and fall, with ris­ing eco­nomic and fi­nan­cial risks. This may make it eas­ier for the U. S. to com­pro­mise, prompt­ing the two sides to end the trade war.

Ac­cord­ing to the spokesman of China’s Min­istry of Com­merce, China does not want to see es­ca­lat­ing Sino- U. S. eco­nomic and trade fric­tion, but is pre­pared for all pos­si­ble sce­nar­ios. VCG

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