Is a Trade War Coming?
By admin March 26, 2018

© Photo Illustration: Shutterstock/CNN

On March 22nd, the U.S. Trade Representative’s office released the U.S. Section 301 investigation report. Trump signed a trade memorandum to impose heavy tariffs on about 1,300 categories of Chinese goods, the total value of which is approximately 60 billion U.S. dollars. The memo also includes restrictions on Chinese companies from taking mergers and acquisitions to U.S. hi-tech companies.

Before this action, on January 23rd, the U.S. announced that it would impose temporary tariffs on imported solar cells and solar panels as well as large household washing machines and a 25 percent and a 10 percent tax on imported steel and aluminum in early March. Meanwhile, the White House also announced a temporary exemption to the European Union, Argentina, Australia, Brazil, Canada, Mexico, South Korea and other countries steel and aluminum tariffs to May 1st, it is quite clear that this sanction was prepared specifically for China.

Why China and why now? As people may remember, Tax reform and jobs were crucial parts of Trump’s campaign commitment. After the promotion of tax reform in 2017, in 2018, Trump took trade protection as an important approach to save jobs in America. In addition, 2018 is the mid-term election year of Congress, May will be an intense voting period. Trump may intend to play a “trade protection card” to gain more support from voters and continue to maintain the Republican Party’s dominace in the House and Senate.  Aside from all the above, the aim of the trade war is to force China to further open up the market, while its deeper purpose is to try to repeat the 1980 trade war with Japan so as to curb China’s economic development.

As a reaction toward the White House’s decision, China’s Ministry of Commerce issued a list of measures and sought public opinion on the proposed tariffs on about 3 billion U.S. dollars of products imported from the US to balance the losses caused by U.S. tariffs. Beijing also warns that “it’s ready to inflict more pain.”

By no doubt, a full escalation of the US-China trade war will have a negative impact on China’s high-end manufacturing development and economic growth and bring a shadow to the global economic recovery. Although the U.S. trade protection will be beneficial to some of its domestic industries, it will damage the interests of most industries and consumers. If the U.S. makes further tariffs on Chinese manufacturing, it would actually equate to taxing consumers, raising the cost of living for the American people, pushing up inflation in the U.S. and restricting American consumption.

It is obvious that in the 21st century, the U.S. and China become each other’s important trade partners. It can be especially difficult, if possible, to draw a clear line between their interests and benefits.


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