White House’s prac­tice of ex­treme trade co­er­cion prompts re­flec­tions on his­tory

Global Times US Edition - - BIZCOMMENT - By Mei Xinyu Page Editor: [email protected]­al­times.com.cn

US Pres­i­dent Don­ald Trump on Thurs­day sud­denly an­nounced on Twit­ter that start­ing from Septem­ber 1, the US will im­pose an ad­di­tional 10 per­cent tar­iff on the re­main­ing $300 bil­lion worth of Chi­nese ex­ports to the US. It means that all Chi­nese ex­ports to the US will be sub­ject to ad­di­tional tar­iffs. The move came just as the lat­est round of Us-china trade talks had ended in Shang­hai and both par­ties agreed to re­sume ne­go­ti­a­tions in Septem­ber. More­over, on July 26, Trump or­dered the US Trade Rep­re­sen­ta­tive in a memo to “use all avail­able means to se­cure changes at the WTO” that would pre­vent self-de­clared de­vel­op­ing coun­tries from claim­ing de­vel­op­ing coun­try sta­tus. Trump said if the US de­cides the WTO has not made “sub­stan­tial progress” after 90 days, it will uni­lat­er­ally take ac­tion. Ex­tend­ing from bi­lat­eral to mul­ti­lat­eral, the US’ “ex­treme pres­sure” strat­egy has reached a height in global eco­nomic and trade ne­go­ti­a­tions.

How­ever, will such threat­en­ing pos­tur­ing from the US re­ally scare a big coun­try like China or crip­ple the global mul­ti­lat­eral trad­ing sys­tem? From the per­spec­tive of gen­eral mar­ket par­tic­i­pants, it is ob­vi­ous that pre­vi­ous US threats have had no ac­tual im­pact on China’s ex­ports and in­dus­trial pro­duc­tion, which have quite a lot of com­par­a­tive ad­van­tages. The US fi­nan­cial mar­ket has al­ready re­acted strongly. Global for­eign ex­change and com­modi­ties mar­kets have also seen tur­moil. The US and China are the only two economies in the world that reach tens of tril­lions of dol­lars. But the US fi­nan­cial in­dus­try is more de­vel­oped, and the US na­tional econ­omy is much more de­pen­dent on the fi­nan­cial sec­tor, so fi­nan­cial mar­ket tur­moil will have a much big­ger im­pact on the US than on China.

The US will have its pres­i­den­tial elec­tion next year. Trump’s

de­sire for re-elec­tion far ex­ceeds that of other US pres­i­dents. Strong eco­nomic per­for­mance will be his big­gest trump card to win the elec­tion. How­ever, the US econ­omy has just passed a record of 120 con­sec­u­tive months of ex­pan­sion at the end of June, in­di­cat­ing that re­ces­sion and fi­nan­cial cri­sis are ap­proach­ing. If a de­pres­sion or cri­sis breaks out when Trump is en­gaged in the in­tense pres­i­den­tial cam­paign, his re-elec­tion hopes will prob­a­bly be dashed. Trump has been push­ing hard and urg­ing the Fed to cut in­ter­est rates sub­stan­tially at a time when the cur­rent US eco­nomic in­di­ca­tors still seem quite good, all be­cause of his lack of con­fi­dence in the US eco­nomic prospects in the com­ing years. Un­der such cir­cum­stances, con­tin­u­ously in­ter­fer­ing in the mar­ket will only lead to more trou­ble for the US econ­omy.

More­over, the US needs to learn the essence of the say­ing that his­tory makes men wise. Suc­cess only comes through hard work. China to­day has be­come the lead­ing man­u­fac­tur­ing coun­try, the largest ex­porter and the sec­ond-largest econ­omy. The coun­try’s equip­ment man­u­fac­tur­ing out­put ac­counted for one-third of the global to­tal in 2013, more than twice as much as Ger­many which was in sec­ond place. There­fore, the US has listed China as a ma­jor strate­gic com­peti­tor. China has de­vel­oped into an in­dus­tri­al­ized gi­ant from a poor agri­cul­tural coun­try in just 70 years. The coun­try has pulled through nu­mer­ous hard­ships and dan­ger, but China pre­vailed over ev­ery dif­fi­culty. The so-called “China mir­a­cle” has en­abled the coun­try to keep ad­vanc­ing.

The ex­pec­ta­tions for the Chi­nese mar­ket wors­ened in the sec­ond half of 2018, but it was nowhere close to the pes­simism that was spread­ing do­mes­ti­cally and in­ter­na­tion­ally dur­ing ma­jor ex­oge­nous shocks in his­tory. The “con­clu­sions” such as the “China col­lapse” the­ory, or the “tech­ni­cal bank­ruptcy of the en­tire Chi­nese bank­ing sys­tem” have been around for years. In the 1980s and the be­gin­ning of the 1990s, many forces were an­tic­i­pat­ing China’s down­fall. But the Chi­nese econ­omy caught up and sur­prised many peo­ple. Since the 1990s, a trade sur­plus has be­come nor­mal and has laid the foun­da­tions for the high-speed growth seen in the last 20 years. Re­flect­ing on his­tory makes men wise. Since 2018, China has been hit by an­other ma­jor ex­ter­nal shock, in the form of the trade war launched by the US. The clamor among some US politi­cians and the ir­ra­tional sup­pres­sion of Chi­nese high-tech firms in­clud­ing Huawei and ZTE smack of omi­nous signs of a new Cold War. But do those ex­pect­ing to pres­sure China to give up its prin­ci­ples and stance by means of ex­treme pres­sure un­der­stand how China over­came mul­ti­ple ob­sta­cles, es­pe­cially in the late 1980s and early 1990s?

The re­peated prac­tice of ex­treme pres­sure by the US has gone as far as threat­en­ing to im­pose ad­di­tional tar­iffs on all the re­main­ing Chi­nese prod­ucts. This cer­tainly makes mar­ket par­tic­i­pants be­lieve that the US gov­ern­ment is run­ning out of gas. Ad­di­tion­ally, as US main­stream me­dia out­lets have re­ported, even some pub­licly rec­og­nized hard­lin­ers were against the new tar­iff threat. On top of that, com­pared with the pe­ri­ods of time when China had been go­ing through ma­jor ex­ter­nal shock­waves, China’s gap with the US in terms of com­pre­hen­sive na­tional power has nar­rowed con­sid­er­ably and China has moved ahead of the US in more fields. What’s more, in­ter­nal po­lit­i­cal con­flicts in the US have grown to a level not seen in the last few decades.

The 2018 midterm elec­tion re­sults ap­pear to have in­ten­si­fied US po­lit­i­cal con­flicts. It is es­ti­mated that the US is at a greater risk of eco­nomic re­ces­sion and fi­nan­cial cri­sis in the fu­ture while China will move to strengthen its con­sol­i­dated, col­lec­tive lead­er­ship, thereby be­ing ca­pa­ble of cop­ing with chal­lenges in a more ef­fi­cient way. Also, a sea change in the US pop­u­la­tion com­po­si­tion points to sub­ver­sive risks lurk­ing be­neath the sur­face. An un­der­stand­ing of all of these things and re­flec­tions on his­tory will help to make more pre­cise judg­ments and wiser de­ci­sions. The au­thor is a re­search fel­low with the Chi­nese Academy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion un­der the Min­istry of Com­merce. bi­zopin­[email protected] glob­al­times.com.cn

Il­lus­tra­tion: Xia Qing/gt

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