Trade War with China

Hendrik_2000 said:

Hear hear

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China should fight the trade war as it did the Korean War
Source:Global Times Published: 2018/4/7 23:18:40

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Recent U.S. threats to slap additional tariffs on Chinese imports were met with a chorus of criticism here Saturday, with leading experts emphasizing that no winner can emerge from a trade war.

U.S. President Donald Trump's administration on Thursday threatened to slap tariffs on 100 billion U.S. dollars worth of imports from China, drawing strong opposition from China and threatening America's own economic growth.

Earlier, the president planned to add tariffs on 50 billion dollars' worth of Chinese goods flowing into the United States.

China will fight "at any cost" and take "comprehensive countermeasures" if the United States continues its unilateral protectionist practices, a spokesperson with the Chinese Ministry of Commerce said Friday.

The trade disputes between the the world's largest and second-largest economies have already sent jitters through markets, causing a nosedive in the U.S. stock market.

Gathering at the Harvard China Forum, an annual conference in Boston that focuses on China-U.S. relationship, leading scholars, business leaders and former government officials warned that a trade war will not only yield no winner, but will also destabilize bilateral relations.

"No one's going to win from the trade war," Anthony Saich, director of the Harvard Ash Center for Democratic Governance and Innovation at Harvard University, told Xinhua on the sidelines of the event, referring to "a trade war where no one's really going to win and where we have an unpredictable president that makes resolution of it problematic.".

There were already severe strains in the relationship, Saich warned, and further hawkish rhetoric will only lead bilateral relationship to become more confrontational.

The concern was shared by Michael Szonyi, director of the Harvard Fairbank Center for Chinese Studies, who said China and the United States share a "very delicate, important and complex" relationship, not one that "we should put into jeopardy without careful consideration."

"Constructive engagement has not failed the United States and China," Stephen Orlins, chairman of the National Committee on U.S.-China relations, noting that the two countries "are not strategic competitors."

Discussing how the idea of a trade war has formulated in Trump's head, experts said it came from campaign promises that were built on false assumption.

The campaign-like threats have already been met with strong opposition from U.S. business groups, who are worried that the tariffs may backfire.

"U.S. firms have spoken out strongly against this latest round (of tariff threats) by Mr. Trump," Harvard Professor Richard Cooper told the forum, predicting the opposition may hurt Trump and the Republican party in upcoming elections.

"Trump has the business community against this policy and that will filter into the Republican members of Congress over time," the former chairman of the National Intelligence Council said, "And so the American domestic politics of this is complicated and Trump will not necessarily, in my view, likely be on the winning side."

According to Saich, due to the different levels of development of U.S. and Chinese businesses, U.S. companies are more vulnerable if the two countries engage in a trade war.

"America is in the much weaker position as this (trade war) expands because American business investments in China are strategic, they're part of a global structure or global value chains and global production," which makes the United States the side that has "more to lose," Saich said.

Despite the challenges, the experts still voiced confidence that China-U.S. ties are durable enough for "bumps in the road."

"I think there's a lot of potential there for China to work creatively at the non-Washington level," as exemplified by a previous visit by California Governor Jerry Brown to China to discuss climate change, Saich said.

"There's a lot more commonality of interest around trade issues around climate issues, around ocean protection outside of Washington than perhaps there is in Washington," Saich said.

"I am confident that enough people recognize the importance of the relationship, and that wiser heads will prevail," Szonyi said.

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Following is a response by the spokesperson of the Chinese Embassy in Canada to a recent Globe and Mail article accusing China of retaliating against the United States by skipping the WTO's dispute-resolution process:

On April 5, the Globe and Mail published an article titled "WTO rules are the first casualty in the China-US shoving match," which commented on the China-US trade dispute. Instead of criticizing the US for provoking the dispute in the first place, the article accused the way China chose to defend its own rights and interests, saying "by skipping the World Trade Organization’s dispute-resolution process entirely," "the world’s biggest exporter effectively ignored a crucial pillar on which the entire system of global rules-based trade stands."

In fact, it is the US that has flagrantly violated the WTO rules.

The US launched the Section 301 investigation against China based on its domestic laws, and announced levying extra tariffs on Chinese products and restricting Chinese investments. Actually these acts taken by the US are not within the framework of the WTO.

The US side, by doing this, also violated the "Statement of Administrative Action" submitted by the US president to the US Congress when it ratified the WTO agreement in 1994. In this statement, the US promised not to unilaterally determine whether practices of other countries violate the WTO rules through the Section 301 investigation.

In stark contrast to the US, China strictly abides by the WTO rules, and refers the US to the WTO dispute settlement mechanism in the first time when it takes countermeasures against the US. The article did not criticize the offender who violates the rules, but blamed the victim who complies with the rules. This reversal of right and wrong is unfair and unsavory.

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Jura said:

now

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President Xi and I will always be friends, no matter what happens with our dispute on trade. China will take down its Trade Barriers because it is the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property. Great future for both countries!

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U.S. Needs China More Than China Needs the U.S.
To avoid Trump's disastrous trade war, three things need to be addressed.
By Stephen Roach
April 6, 2018, 4:00 AM CDT

Not one to be outdone by any adversary, Donald Trump has

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the ante in a rapidly escalating trade war with China, threatening an additional $100 billion of tariffs on top of the initial round of $50 billion. In doing so, the Trump administration is failing to appreciate a crucial reality: The United States needs China more than China needs the U.S.

Yes, China is still an export-led economy, and the American consumer is its largest customer. But China’s export share of its gross domestic product has fallen from 37 percent in 2007 to slightly less than 20 percent today, an important outgrowth of a decade-long rebalancing. By drawing increased support from domestic demand, China is better able to withstand the pressure of tariffs and other actions that are aimed at its exporters.

Not so with the United States. The U.S. depends heavily on China for providing the low-cost goods that enable income-constrained American consumers to make ends meet. The U.S. also depends on China to support its own exports; next to Mexico and Canada, China is America’s third largest and by far its most rapidly growing major export market.

And, of course, the U.S. depends on China to provide funding for its budget deficits. It is the largest foreign holder of U.S. Treasury securities — some $1.3 trillion in direct ownership and at least another $250 billion of quasi-government paper. A lack of Chinese buying could turn the next Treasury auction into a rout.

America depends on China because of a fundamental weakness in the structure of the U.S. economy — a profound and worrisome lack of domestic saving. In the fourth quarter of 2017, the net domestic saving rate (depreciation-adjusted saving of households, businesses and the government sector, combined) was just 1.3 percent of national income.

Lacking in savings at home, and wanting to consume and grow, the U.S. must import surplus foreign saving from abroad – and run massive balance-of-payments and trade deficits to import this capital. In 2017, the United States had merchandise trade deficits with 102 nations!

President Donald Trump continues to single out China as the villain in the great American tragedy, when in fact he should take a careful look in the mirror.

First of all, he continues to insist that the U.S.-China trade deficit is $500 billion, fully one-third larger than the actual figure of $375 billion published by the Commerce Department.

Second, data from the OECD and the World Trade Organization suggests at least 40 percent of this bilateral imbalance reflects supply-chain effects of components and parts that are produced outside of China but assembled inside China. That means, based on the value added of what is actually produced in China — the essence of the alleged China threat — that the 47 percent share of the U.S. deficit ascribed to China would be reduced to around 28 percent.

Yes, this is still a big number. But it is far below the claims of President Trump and the official figures of the Commerce Department. While the international specialization of comparative advantage explains this portion, that argument doesn’t carry much weight in the political arena.

Third, Trump’s budget deficits will make America’s trade problems worse. A low-saving U.S. economy can’t square the circle without trade deficits. With tax cuts of $1.5 trillion over the next 10 years and another $300 billion in spending increases added in by a reckless Congress in order to avert a government shutdown late last year, the net domestic saving rate is headed toward zero – or even lower – with trade deficits likely to widen sharply in response.

And that leads to the uncomfortable truth of China bashing: protectionism in the face of widening trade deficits. Courtesy of Trump tariffs, China’s deficit will now be distributed to the other 101 nations that make up America’s multilateral merchandise trade deficit. Relative to China, these are higher-cost producers, meaning the likely response to this retaliation will have the effect of taxing the very families Trump insists he is protecting.

In my 2014

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, I present estimates of the benefits of low-cost Chinese production, comparing its manufacturing compensation with that of the other top-10 sources of U.S. imports. Chinese labor input was just $2.30 an hour while the average for foreign suppliers ranked two through 10 was about $26 per hour. Trump’s tariffs would, in effect, shift U.S. imports toward these higher-cost producers — with huge potential consequences on the purchasing power of beleaguered American consumers.

Three things need to be addressed to avoid this nightmare:

One, communication: The exchange of views between the U.S. and China is far too episodic — annual gatherings of the Strategic and Economic Dialogue, the Joint Commission on Commerce and Trade, as well as periodic leader-to-leader summits. A permanent secretariat, staffed by high-level experts from both sides, would be far preferable in tackling the complexity of a challenging relationship.

Two, market access: Both nations should put a high priority on breaking the 10-year logjam in negotiations of a bilateral investment treaty. For U.S. multinationals, access to China’s rapidly expanding domestic markets is a major growth opportunity. The same is the case for China’s “going out” global investment campaign.

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Figaro said:

Decent article by Stephen Roach, Yale faculty member and former chairman of Morgan Stanley Asia. Basically pours cold water on trade war hawks ...

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ZeEa5KPul said:

I think an important truth gets lost in these "who needs whom most" back-and-forths: neither needs the other very much. The total bilateral trade forms less than 5% of China's GDP and 3.5% of America's - even if it vanished tomorrow (and there's no prospect of that occurring) China wouldn't be in recession and America would barely enter one. More importantly, both these shares are declining organically.

And there's nothing unusual about Trump "toughening" rules on Chinese investments in the US, and no loss for China. There was no prospect of China ever acquiring companies like Raytheon and Intel (which, to be honest, are the companies China really wants), so what exactly was lost here?

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