Typhoon Trump has finally landed in Beijing. For more than three months, the storm clouds have gathered over the world’s second-largest economy and now the whirlwind of tariffs on Chinese imports worth US$200 billion have been unleashed.
What started off as a low-level squabble has become a full-blown trade conflict with no end in sight, except a Cold War-style standoff.
In the latest tit-for-tat round, President Donald Trump ordered the United States Trade Representative to escalate the dispute on Monday.
“We have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies,” Trump said in a statement. “We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly.
“So far, China has been unwilling to change its practices,” he added. “As president, it is my duty to protect the interests of our country. My administration will not remain idle when those interests are under attack.”
In five short sentences, Trump snapped last week’s olive branch from Washington to hold ‘peace’ talks with Beijing and warned he could slap tariffs on the rest of China’s imports worth $267 billion.
As for a response, President Xi Jinping’s administration has limited options when it comes to US imports. Creativity will be called for although so far, the reaction has been measured.
“To safeguard our legitimate rights and interests, and the global free trade order, China will have to take countermeasures,” the Ministry of Commerce said in a statement. “We deeply regret this.”
Targeted moves
Foreign Ministry spokesman Geng Shuang later confirmed that Beijing was discussing what countermeasures to deploy. “We will release them in time,” he said.
Targeted moves on major American companies, such as Apple, would prove effective, Lou Jiwei, an influential player in global financial circles, pointed out at the weekend.
“Beijing should disrupt supply chains of American companies which rely on low-cost goods or components from China’s vast manufacturing industries,” Lou, the former finance minister and head of China’s sovereign wealth fund before taking over as chairman of the National Council for Social Security, told an economic forum.
“This counterattack strategy needs to restrict exports to the United States as well as [imports of] US goods,” he added. “Only knowing the pain of fighting will stop the war and cause [the United States] to negotiate seriously.”
Eventually, that will happen. But in the near future, it is looking increasingly unlikely with the US trade deficit with China rising in the past few months after hitting a record $375.2 billion last year.
Still, the seeds of what has been described as “the summer of discontent” go much deeper.
They strike at the heart of Beijing’s economic model, including the “Made in China 2025” plan, as well as the Belt and Road Initiative, the centerpiece of Xi’s foreign investment policy.
“The current trade war between the United States and China is not about trade,” Yukon Huang, a senior fellow at the Carnegie Endowment, said. “This war is about protecting the technological edge that has made the United States the world’s dominant economic power.”
Yet it comes during a difficult period for Beijing. The economy is cooling while corporate and local government debt is hovering around the 16.61 trillion yuan (US$2.6 trillion) mark, data from the Ministry of Finance showed.
At the same time, the central government is realigning the manufacturing base by pushing ahead with high-tech production through the “Made in China 2025” program, as well as developing financial and consumer sectors.
Something will have to give.
“Last fall, China [held the 19th National Congress of the Communist Party of China], where they pledged allegiance to financial reform. They want growth that is more sustainable, and so they set out a course where they would get tougher on financial discipline,” Carl Tannenbaum, the chief economist of Northern Trust, an international investment advisory firm, said.
“But in the wake of the trade conflict, they’ve seemingly retreated from all of those commitments, and they’re adding to a [debt] problem that was already very large. That raises the risk of a disorderly unwind, which would create all kinds of difficulties, not just for China, but everybody who deals with them,” he added.
The pace of reforms has been glacier-like during the past few years, despite commitments from Beijing to further open up its markets and cut the mountains of red tape which entangle foreign companies.
‘Reform deficit’
“Promise fatigue” has set in, according to the European Union Chamber of Commerce in China, as overseas companies are denied “a level playing field” because of a “reform deficit,” which shields domestic firms.
In its latest report released on Tuesday, the ECC detailed the problems EU businesses face in China, including a “roped off internet,” intellectual property protection and forced technology transfer.
The survey involved 1,600 European companies and the conclusions were scathing. Preferential treatment for lumbering state-owned companies was rampant, while market access barriers still existed across a wide range of industries.
“European companies have for a long time been stifled by the effects of China’s reform deficit, and now they are taking collateral damage from the US-China trade war,” Mats Harborn, the president of the EU Chamber of Commerce in China, said.
“Creating an open and fair market based on reciprocity will de-escalate this conflict,” he added.
Speeding up China’s reform program to keep pace with a rapidly maturing economy would also ease trade tensions, the report stressed.
Another problem has been the impact that SOEs have had on the private sector as they strangle competition and drain funding. “Tackling these serious issues would create a fair and competitive business environment,” the report stated.
But not before Typhoon Trump finally blows itself out.
Loss to american consumer?but also a gain to them by creating more jobs and more money to spend for subsidy????
Jeff Voeks after the mess in middle east favouring Israel ?
By riding on a trading deficit, the citizens of USA were actually enjoying a lot of goods and services without having to pay back in similar quantities. now, it will suffer worse than China; so much worse off that Trump will be closer to the objective he so obviously loves: WAR
P==You have the communist propaganda down, it’s China that is threatening ,the whole world sees it.
Yes president Trump is a storm coming for China, We could have been friends but the communist Chinese chose to be hostile. So be it.
No we will just make more stuff in the U.S. and do business with other countries instead of china.
Again another US accusation is that China’s unfair trade practices are against international rules but the WTO so far has confirmed that china is WTO compliant.
Ever since Trump became the top dog, it is the US that has consistently and persistently broken WTO rules to the extent of portending the destruction of the WTO. This is indicated by US refusal to confirm appointees to the WTO Appellate Court which will cripple the WTO.
Trump has been lying that the WTO is anti-USA.
Back to the Opium Wars whereby western powers unite to force Opium into China. During those barbaric times, military force was used but now since China is stronger, the Westerners are using other means like tariffs and financial threats with military threats lingering in the background re naval assets in the SCSea and the East China Sea.
US Foreign Policy is littered with lies to justify its militaristic imperialist ambitions. This is all too evident and no need to repeat. This DNA of lying has now extended to the trade war against China.
First justification, was national security for iron, steel and aluminium tariffs. Then China’s tariffs are high but US has no tariffs. Next China stealing IP without citing a single real case that has gone to arbitration. Then forced technology transfer in the JV contracts, which were entered into freely by the US companies, so how can it be forced.??
Followed by China restricts access to investment in certain sectors. Hey, do westerners believe in national sovereignty ?? Apparently national sovereignty applies only to western countries but not for China. And oh US and Europe do not restrict China’s access in US markets, hahaha.
And Trump and gang do not mention US forbids exports of high tech equipment to China which contributed to the trade deficit self-inflicted but blamed on China.
The next excuse was "Made in China 2025" which means China has no sovereignty in setting its own industrial policies.
Another one is that imports from China is stealing US jobs while all the while the US is bragging about lowest unemployment in the US at 4.1%, the best ever according to Trump. So how were the jobs stolen ??
All the above excuses were justified by lies repeated ad nauseum led by the liar-in-chief, Trump, whose own people admits and counts his lies in the thousands. Trump said imports from China is stealing USD 500 million. To Trump, imports from China has not benefitted people in the US and therefore are unfair.
In fact the bioggest thief on the planet is the US which steals from the world by issuing worthless fiat currency USD to pay for imports.
The writer is saying that western companies and governments are angelic holies and do not pay export bribes. Hahaha.
I am a Malaysian and there was a big scandal involving the export of Skorpene submarines from France to Malaysia whereby Malaysian defence officials were bribed to the tune of hundreds of millions of RM. No action was taken by the French government against the French exporter.
Mandela’s political party was initiated into bigtime corruption by European arms exporters. See video " Shadow Government " available on the youtube.
then they should drop out of the World Trade Organization if they think international rules don’t apply to them.
Dwayne Hardin,
Each country has its own laws, regulations, political system, culture, history, etc. When you visit a country, you must abide by the laws of that country even if such laws differs from those in your country. When you do business in a foreign country, you must also abide to the laws of that country. Why should China change its laws and customs even if they differ from the laws and vustoms of your country?
I do not think that the author of this article understands the matter. He writes that Beijing is hit by $200 billion tariff by USA. But neither Beijing nor China nir the Chinese exporters have anything to pay when USA imposes tariffs on Chinese goods imported by USA. The American importers have to pay the tariff and, as usual, they will pass the expenses onto their clients, who are American consumers or American companies. So, actually, by imposing tariffs on Chinese products, Trump is hitting the American consumers and American companies. I agree it is a very hard blow, especially for the American consumers.
You’re saying China doesn’t have to play by the same rules as everybody else because they are bigger than everybody else?
China is not the big fat American walking around with the big bat. So there has never been force involved. As I said before, China is a huge market of 1.4 billion, there is some "taxes" to gain the market shares in a competitive environment and most businesses are willing to do that. On top of that, the technology that comes to the market is in general 2 to 3 generations behind that being prototyped, so there is really not much to be lost.
And businesses are happy to do it so far and get super profitable.
The US keep using excuse of unfair business while there is no gun or violence involved nor legal barrier on China side. The so-called unfair business is probably "technology in exchange of gain in market share" is practiced worldwide. It is a way of controlling the market share because Chinese market is so huge that it can’t allow monopoly or antitrust. No country can force a monopoly on China, not just the US.
I still haven’t heard why China can’t forego forcing US company’s to give up their proprietary information as a condition of doing business there. Does China still think it has to copy other people’s work to be competitive?
People in the US will be paying 10% more for the very cheap stuff at the Walmart. Will they care? Let’s see how the numbers play out over the next year.
Don’t know which typhoon you are referring to, Florence or Mangkhut. What’s the effect of both on the national economy? Very little. Nothing dramatic about the tariffs. Minimal impact. Both loss if it goes ahead especially to the American consumers who have to pay more for the same products.
When you say "Trump will notice" I assume you mean that he wants in – or in even more -on the various bribes being paid out.