Why China fears a trade war with the US
All eyes in China this week were on the picturesque seaside town of Boao on Hainan island, the setting for the meeting known as China’s Davos. On Tuesday, President Xi Jinping took to the stage amid growing fears of a trade war with the United States.
Xi offered more carrots than sticks, pledging to address concerns on Intellectual Property Rights — one of the Donald Trump administration’s demands — and to reduce import tariffs in the automobiles sector. Interestingly, just a few hours before Xi’s speech, Trump had tweeted, “When a car is sent to the United States from China, there is a tariff to be paid of 2.5 per cent. When a car is sent to China from the United States, there is a tariff to be paid of 25 per cent. Does that sound like free or fair trade. No, it sounds like STUPID TRADE — going on for years!”
When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE - going on for years!
— Donald J. Trump (@realDonaldTrump) April 9, 2018
“China is not afraid!” has been a social media campaign that has been spreading on Chinese websites in recent days, aimed at the tough talk from Washington on the trade front. Yet below the surface, there are deep concerns in China on the fallout. Hence Xi’s hint at a compromise, even if to be fair, Beijing had long planned to take measures to reduce auto tariffs, which have already been falling.
The problem for China is that given the considerable trade surplus it enjoys over the US, it is fast running out of retaliatory measures. The story so far: after Trump announced a 25 per cent tariff on steel, which account for around $1 billion (Rs 6.4 thousand crore) of China’s exports, Beijing hit back with tariffs on 120 American products worth around $3 billion (Rs 19.4 thousand crore), from wine to pork.
Trump responded on April 3 announcing plans to place tariffs on $50 billion (Rs 3.24 lakh crore) worth of imports on goods such as electrical machinery, which are a significant Chinese export. Beijing, the next day, said it would also place 25 per cent tariffs on $50 billion worth of US imports, including in the aerospace sector where China has emerged as a key market for companies like Boeing.
The Trump administration has since said it could retaliate on a further $100 billion (Rs 6.49 lakh crore) worth of imports, which would leave Beijing, having ratcheted up public anger over the move, with little room to respond without hurting itself, for instance by threatening to dump US treasuries.
It remains to be seen if Trump will be satisfied with Xi’s olive branch, or if he will want more than he could paint as a victory for his supporters. Till then, the tough talk continues.
(Courtesy of Mail Today)