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Immediately after the United States unveiled a 25% tariff on $16 billion worth of Chinese goods starting August 23, China retaliated, announcing a 25% tariff on $16 billion worth of US products that will go into effect the same day.
The Trump administration’s tariffs announced on Wednesday were the second tranche of its $50-billion levies under Section 301 announced on June 15. In July, when the US implemented the first tranche, placing 25% tariffs on $34-billion of Chinese products, Beijing retaliated by imposing duties on an equal amount of American goods.
Its latest tit-for-tat retaliation shows the Asian giant is determined to go toe-to-toe in its trade fight with the US.
Beijing’s resolve has also been on full display in recent days when it allowed or encouraged its state-run media outlets to adopt an aggressive posture vis-à-vis the US and its president. For instance, the People’s Daily, the mouthpiece of the ruling Communist Party, stringently accused Trump of starring in his own “streetfighter-style deceitful drama of extortion and intimidation” and vowed that the People’s Republic “will not surrender to US threatening tactic[s]” and its “trade blackmail.”
Chinese state-run newspapers were particularly infuriated by the remarks of US National Economic Council Director Larry Kudlow. In media interviews, Trump’s chief economic adviser warned that Beijing should “take Trump seriously,” called China’s threat of imposing $60-billion-tariffs “a weak response” to Trump’s $200-billion proposal and believes that China’s economy is beginning to decline.
In some ways, the Chinese government’s resolution is quite surprising. The US is apparently gaining the upper hand over China in the current trade war between the world’s two superpowers. That its economy is doing well while China’s economy is slowing and its stock market has been faring better than the latter’s since the trade dispute started is clear evidence that it has significant economic advantages over China.
It’s also true that it is technically impossible for Beijing to match the US’s tariff threat if the trade war escalates. The $110-billion tariffs on American exports already imposed or announced are nearing its tariff retaliation limit. According to the US Census Bureau, China bought only about $130 billion of US goods while selling $505 billion to the US in 2017.
Moreover, as already noted, most of Trump’s key grievances against Beijing, such as intellectual property theft and forced technology transfer, are justified. In fact, they are shared not just by Americans across the political spectrum but by many in other countries, including China’s large trading partners, such as the European Union and its member states.
In many other respects, Beijing’s hardline response is, however, understandable. Indeed, there are a wide range of reasons behind Beijing’s confidence that China can fight and, eventually, win the trade battle with Trump’s America and some of these have been recently singled out by the highly censored PRC’s main newspapers, notably the People’s Daily and its influential offspring, the Global Times.
These include Beijing’s views that (1) the US is not up against “an economy like Japan, South Korea or Mexico” but “a major power,”which with a “1.4 billion population continues to provide enormous market potential” that (2) “the US is eager to solve it at one stroke, while China is prepared for a prolonged battle” and that (3) “the trade war started when the US first began harming others which in turn hurt itself and has lost support domestically and internationally.”
These three claims are, by and large, true. The world’s most populous nation and second-biggest economy is “a major country.” Therefore, it is certainly difficult for the US to “strike down a giant like China.” especially given the fact that “the Chinese market is key to the survival of many big American companies and American farmers.”
Beijing is also very astute to be “patient to play with the Trump administration” and “prepared for a prolonged battle.”
As an authoritarian, one-party regime – which has ruled the PRC since its founding in 1949 and fully controls virtually every institution, everybody and every movement, including its state media and its population’s activities online – the Chinese government can curb or limit any backlash caused by the trade war.
By contrast, the Trump White House, like previous US administrations other democratic countries, doesn’t have such a luxury. The longer the tariff battle lasts, the greater the harm it causes to the American people and US businesses and, consequently, the stronger their opposition is.
The People’s Daily opined: “Though the US appears to be big and strong, it is, in fact. vulnerable from inside. Washington is too paranoid and stubborn to take care of the interests of American farmers, entrepreneurs and consumers.” Such a view is perhaps more applicable to China and its government than to the US and the Trump White House. If its slowing economy, as well as other recent signs and developments, are any guide, China seems to be big and strong but may be weak on the inside.
The Trump administration isn’t as indifferent to Americans’ concerns as Beijing thinks. Its $12-billion assistance to farmers hit by tariffs is an indication. By contrast, the Chinese government has not yet taken any similar measures to help those affected by the US’s tariffs. A major reason for this could be that in an authoritarian and highly censored China, people and companies aren’t allowed to publicly voice their apprehension and opposition.
The problem for the US and, indeed, for the Trump administration is that they cannot aid every company and every sector that is affected by the trade war, especially if the conflict is protracted. China’s leaders are well aware of this and, consequently, willing to play a prolonged game
The problem for the US and, indeed, for the Trump administration is that they cannot aid every company and every sector that is affected by the trade war, especially if the conflict is protracted. China’s leaders are well aware of this and, consequently, willing to play a prolonged game.
Another key factor, if not the main reason, behind China’s confidence that it can sustain and eventually win a prolonged trade battle with the US is that the Trump administration “has lost support internationally” because it has waged trade wars against not just China but many other countries, including Washington’s oldest and closest allies.
Such an America-against-all approach hugely undermines his country’s economic, political and strategic position while greatly strengthening China’s.
Undoubtedly, China is now an economic powerhouse, with a colossal market. Yet, if Trump maintained strong ties with the US’s main trading partners and key allies it would have not only limited damages caused by China’s tariffs but also put greater pressure on Beijing.
Trump’s recent truce with the 28-member European Union has somehow enhanced his leverage because it is not only the world’s biggest trading bloc but it also supports the US’s accusations concerning China’s unfair practices. What’s more, partly because of that, Beijing has apparently failed to convince Brussels to join forces against Trump.
In one of his recent interviews, Larry Kudlow also revealed that, in an effort to isolate China, the Trump White House is “moving close on Mexico,” the US’s southern neighbor and one of its biggest trading partners.
However, while they are essential, Trump’s recent overtures are insufficient. If he truly believes that China has consistently engaged in unfair trade practices and he is willingly and effectively confronting them as he repeatedly states, he definitely needs a bigger and stronger alliance.
Trump’s unilateral decision to quit the Trans-Pacific Partnership (TPP), a huge 12-member trade deal, has greatly harmed America – not only economically but also politically and strategically. Many nations of this accord, championed and signed by his predecessor, Barack Obama, are the US’s key allies and partners in the Indo-Pacific region and they share its concerns about China.
His withdrawal reinforces a general view and Beijing’s argument that Trump’s America is nationalist, protectionist, unilateralist and untrustworthy. As a result, Trump has lost not only economic and political leverage but moral ground, enormously limiting his ability to deal with China.
Indeed, as already argued, if Trump continues to reject US-led multilateral trade deals, such as the TPP, and goes it alone against Beijing, it will be very hard, if not impossible, for him to sustain, let alone win, the trade war with the Asian giant.
If he wants to have any chance of winning such a formidable battle with an increasingly assertive, authoritarian and powerful China, the American leader must adjust his foreign policy by seeking to strengthen or maintain his country’s international alliances and partnerships. The quicker he makes such a shift, the better because he cannot afford a lengthy trade fight with such an opponent.
The good news for America’s 45th president is that many of Washington’s traditional allies and major partners are open to – indeed, eagerly waiting for – his rethink.
Undoubtedly, such an about-turn isn’t easy for him because Trump ran and won the presidency on an “America First” platform and, clearly, bonding isn’t his style. But, then again, if he stubbornly continues his “America First” doctrine, he will transform his country into “America Alone.” And, an “American Alone” will never be taken seriously by a rising China.