China Fires its First Vol­ley in Trump's Trade War

Trillions - - Contents -

In re­tal­i­a­tion for tar­iffs im­posed by the Trump Ad­min­is­tra­tion on more than 100 Chi­nese prod­ucts, China has im­posed its own im­port du­ties of 15% to 25% on 128 prod­ucts it im­ports from the U.S. The tar­iffs are sub­stan­tial enough that Chi­nese im­porters will seek to source the prod­ucts from other coun­tries.

In ad­di­tion to the im­port du­ties, China’s Com­merce Min­istry threat­ened to take le­gal ac­tion against the US through the WTO, and urged Wash­ing­ton to “pull back from the brink, make pru­dent de­ci­sions, and avoid drag­ging bi­lat­eral trade re­la­tions to a dan­ger­ous place.”

While it is true that China en­gages in a num­ber of un­fair busi­ness prac­tices, steals tech­nol­ogy from other coun­tries and uses its ex­ports as an eco­nomic weapon, China's ac­tions are not much dif­fer­ent than U.S. tac­tics. Both coun­tries sub­si­dize many of their in­dus­tries and the U.S. also en­gages in whole­sale eco­nomic es­pi­onage.

The rea­son that the U.S. has such a large trade im­bal­ance with China is not so much that China en­gages in un­fair prac­tices but be­cause Chi­nese man­u­fac­tur­ers are vastly more com­pet­i­tive and China is much bet­ter man­aged as a coun­try.

China has in­vested heav­ily in its in­dus­try, in­fra­struc­ture and se­cur­ing raw ma­te­ri­als, while Amer­ica has di­verted its fi­nan­cial re­sources to en­rich­ing its oli­garchy and their crim­i­nal cor­po­ra­tions at the ex­pense of the rest of the coun­try.

When the U.S. lost agri­cul­tural jobs to ma­chin­ery and chem­i­cals it ramped up man­u­fac­tur­ing, when it lost its man­u­fac­tur­ing jobs to in­ef­fi­ciency and for­eign com­pe­ti­tion it switched to a war, con­sumerism and debt econ­omy—the fi­nal stage of a fail­ing cap­i­tal­ist econ­omy.

By spend­ing a tril­lion dol­lars a year it can't af­ford on en­rich­ing its war in­dus­try, the U.S. fed­eral govern­ment has piled up more than $21 tril­lion in debt and this year will likely spend over $600 bil­lion just on debt in­ter­est.

Blam­ing other coun­tries for decades of bad govern­ment won't rem­edy Amer­ica's fun­da­men­tal prob­lems. Im­pos­ing im­port du­ties on coun­tries who are more com­pet­i­tive will drive up U.S. in­fla­tion while weak­en­ing ex­port mar­kets that re­tal­i­ate with their own tar­iffs and ap­ply down­ward pres­sure on wages.

The log­i­cal end re­sult will be that the aver­age Amer­i­can will be­come poorer and have a bleaker fu­ture.

The so­lu­tion to what ails Amer­ica's econ­omy is not im­pos­ing trade bar­ri­ers but to ad­dress the root cause and dras­ti­cally cut mil­i­tary spend­ing, stop cre­at­ing en­e­mies and in­vest in new tech­nol­ogy, ed­u­ca­tion and in­fra­struc­ture.

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