Trump’s rhetoric raises stakes in global game of chicken
TAISEI HOYAMA and ISSAKU HARADA, Nikkei staff writers — April 07, 2018 05:01 JST
U.S. President Donald Trump and Chinese President Xi Jinping are pushing each other’s limits on trade. © Reuters
WASHINGTON/BEIJING — The U.S. and China are digging their heels in deeper on trade with their threats of retaliatory tariffs, even while keeping the doors open to negotiations to avert a damaging trade war.
The current round of fist-shaking started on Tuesday with the U.S. proposing 25% in added duties on roughly 1,300 Chinese products, such as industrial robots and other machinery. This would impact $50 billion, or 10%, of its total imports from China.
China responded the next day with its own plans for 25% tariffs on 106 American products, including soybeans, automobiles and aircraft, that would also impact about $50 billion of imports from America.
Trump did not back down. “China has chosen to harm our farmers and manufacturers,” he said in a statement dated Thursday, adding that he had told the Office of the U.S. Trade Representative to consider tariffs on another $100 billion in imports from the Asian country.
The president’s decision to double the stakes shocked observers at home and abroad. He is likely trying to shore up his approval ahead of the midterm congressional elections in November, since he could face a greater risk of impeachment over suspected ties to Russia if his Republican Party loses its House majority.
Beijing was likely not expecting the latest American threat, which came on a Chinese holiday. Its Ministry of Commerce, usually quick to respond, did not issue a statement until hours later.
The ministry warned that China will fight to the end if Washington continues with protectionism. But it did not threaten an equal response as in the past, since additional tariffs would have to be imposed on virtually all American imports for another $100 billion. It instead threatened “comprehensive” countermeasures that could target cars, for example.
China will not hesitate to fight back against new tariffs from the U.S., a Commerce Ministry spokesman told reporters on Friday.
But despite the escalating rhetoric, both sides have been careful not to cross a line.
“I was surprised at how much ‘low’ tech was there compared to high tech,” said William Reinsch, an expert at the Center for Strategic and International Studies in Washington, of the American tariffs proposed on Tuesday. The U.S. was trying to steer clear of products like smartphones and telecommunications equipment, or items like clothing, shoes and toys that American consumers rely on heavily.
A worker takes a sample from an incoming truckload of soybeans at a facility in Fargo, North Dakota. Donald Trump won the state in the 2016 U.S. presidential election. © Reuters
Meanwhile, the Chinese tariffs on soybeans and automobiles would disproportionately affect U.S. regions that voted for Trump. Beijing is trying to make the president rethink his stance by squeezing his base and its Republican lawmakers.
Retaliatory tariffs are supposed to hit the other side where it hurts to persuade it to reconsider, a trade expert said.
In Thursday’s statement threatening more tariffs, Trump also stressed that “the United States is still prepared to have discussions” with China. Neither country has said when the duties would kick in.
Washington will seek public comment until late May before finalizing its list of tariffs and a start date. “No tariffs will go into effect until the respective process is complete,” U.S. Trade Representative Robert Lighthizer said in a statement dated Thursday.
Chinese President Xi Jinping is expected to speak at the Boao Forum for Asia on Tuesday. 2018 marks 40 years since China began opening up its economy, and Xi could announce further measures as an olive branch to the Trump administration.
Whether the two countries can find enough common ground through behind-the-scenes talks to prevent a full-blown trade war is unclear. Washington is willing to scrap its tariff plans if Beijing makes concrete promises on intellectual property protection, as well as reducing the American trade deficit with China by $100 billion. But the Chinese do not want to lose face. The possibility of a trade war still looms over the global economy as each side waits for the other to back down first.
Expatriate Dr. Sabri. g. Bebawi