Trade tensions between China and the United States are intensifying, and the two countries are approaching the inflection point of a trade war.
On Jan. 22, US President Donald Trump announced steep tariffs on imported washing machines and solar panels. Washington imposed a 50 percent tariff on washing machines and a 30 percent tariff on imported solar cells and modules.
The move is aimed at protecting US domestic manufacturers, and is considered the first action under Trump’s “America First” doctrine. China bears the brunt of the tariffs as the world’s largest producer of washing machines and solar panels.
A month later, the US Commerce Department recommended a 53 percent tariff on steel imports from 12 countries, including China and Russia. A 23.6 percent tariff is also recommended for aluminum imports from China.
China, of course, could respond with similarly harsh action. For example, it could reduce its purchases of US Treasuries or impose restrictions on rare earth exports to the US.
But China clearly does not want a trade war. Instead of hitting back at Washington, China has made several compromises and its officials frantically lobbied US diplomats to prevent the situation from escalating.
Terry Branstad, the US ambassador to Beijing, met privately with Wang Qishan, a well-trusted troubleshooter of President Xi Jinping, Financial Times reported.
Liu He, the Chinese leader’s top economic adviser, also paid a visit to Washington.
China’s Commerce Ministry even announced the removal of anti-dumping and anti-subsidy duties on US white-feathered broiler chickens as a friendly gesture before Liu’s trip to the US.
However, Trump continued his tough stance and even reportedly refused to meet Liu.
The US leader is apparently using the “madman strategy”, which means making a threat effective by persuading your opponent that you’re unstable enough to follow through. This tactic was often used by another American president, Richard Nixon, during the Vietnam War.
But a full-blown trade war is going to hurt both countries. If that happens, Trump stands a slim chance of getting reelected while Xi doesn’t really have to worry about losing his job.
So it is safe to say that China-US relationship is neither going to get a lot worse nor a lot better, something that Chinese paramount leader Deng Xiaoping already pointed out many years ago.
This article appeared in the Hong Kong Economic Journal on March 2
Translation by Julie Zhu
[Chinese version 中文版]
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