US-China trade rift: Rocky patch or worse?
By Jon Taylor |
China Watch |
Updated: 2018-04-18 11:12
On April 4, US President Donald Trump announced a series of punitive tariffs on up to $50 billion of Chinese exports to the United States, which Trump claims is designed to cut China's trade surplus with the US by $100 billion. In response, China released a preliminary list of retaliatory tariffs totaling $3 billion on products ranging from pork and soybeans to wine. While these products or commodities represent a tiny fraction of its US imports, they serve a symbolic purpose.
Why should we care about US pork, soybeans and wine imports? While China is not necessarily a large net importer of US pork products, it is the biggest buyer of US soybeans. China imported $14.2 billion of American soybeans in 2016 — about a third of the entire US soybean crop — primarily to feed about 400 million pigs and other livestock. The tariff on soybeans will have a detrimental effect on rural Americans.
In addition, while pork imports are not as important as they were a decade ago when the US was the leading supplier of China's pork imports, the US remains the second-leading supplier of pork after Germany. Imposing a 25 percent levy on US pork imports will hurt farmers throughout the US, but particularly in Iowa. Why Iowa? Because it is the top pork-producing state and just happens to be the home state of Terry Branstad, the US ambassador to China.
The 25 percent levy is a heavy blow to Iowa, a so-called swing state during US presidential elections. While it swung to Trump in 2016, it voted for Barack Obama in both 2008 and 2012. The pork levy could have a direct impact on Trump's chances in the state during the 2020 presidential election.
Further, China is the world's fastest-growing wine market and is a crucial market for US wineries. The number of consumers of imported wine in China has increased by roughly 250 percent, and wine sales have increased by almost 450 percent over the past decade. Most of those American wines come from California, Texas, Oregon and New York.
A tariff battle will seriously affect US wineries, particularly those in California, which account for nearly 90 percent of US wine exports to China. A continued battle over tariffs could have a permanently negative impact on the US wine industry. China's domestic industry continues to grow and is now the world's seventh-largest producer of wine. Chinese consumers could easily turn away from expensive, tax-induced US wines in favor of domestic wines or those imported from Europe, South Africa or Chile that are not subject to high taxes.
In January 2017, President Xi Jinping noted in his speech at the World Economic Forum in Davos that "No one will emerge as a winner from a trade war." Trump's path of pursuing vindictive import duties and tariffs is sure to result in tremendous harm, not only to Chinese and American consumers, but to the global economy.
Trump's trade tariffs are a losing proposition, motivated more by US domestic politics than sound economics. Simply put, his tariffs are not going to work and will likely have a negative impact on the economies of China and the US. Trump is engaged in fantasy if he believes imposing tariffs on a host of Chinese imports will have a positive impact and increase jobs in the US. Tariffs will ultimately make US exports less competitive, not more competitive, and they will result in the loss of American jobs and increased costs for American consumers.
Making Chinese imports more expensive adversely affects American consumers, particularly the working class and middle class. It is ultimately a lose-lose proposition for the US and China. Trump and his protectionist supporters have justified the tariffs by claiming that they will protect American workers from highly subsidized Chinese companies that sell steel and aluminum at low prices in the US market. But that is ludicrous given that 10 other nations export more steel to the US than China – and that the US steel market's share represents 70 percent of overall steel products. It will make automobiles, beer and soft drinks more expensive. Frankly, the tariffs smack of a political payoff rather than sound economic theory and are definitely not in the best interests of American workers or consumers.
China has shown a willingness to talk with Trump and his administration about economic issues. The key is how Trump reacts. Will he continue to posture or will he demonstrate a willingness to engage in cooperation? Will he expand his protectionist rhetoric and policies in a foolish attempt to escape economic globalization and "save" American jobs, or will he finally recognize that economic globalization is the key to both amicable China-US relations as well as an expansion of the global economy?
The tariffs imposed by Trump have more than just an impact on China-US economic relations, although that is an important feature. These tariffs have a ripple effect on our overall relations. They have an impact on our cultural, educational, social and scientific relations. They have an impact on the very nature of normalized China-US relations.
Fortunately, after two weeks of tension, the friction over trade between China and the US appears to have died down just a bit. The question is if this is a lull in the storm or the end of it. The timing of Trump's tariffs might give us a little bit of hope regarding the conflict between China and the US. Trump announced the tariffs immediately after President Xi Jinping had been re-elected by the National People's Congress and China had rolled out a series of significant institutional reforms. This suggests that while the US and China are engaged in a level of contention over trade issues, there continues to be a semblance of collegiality between Xi and Trump, which hopefully will lead to a win-win solution to the trade imbalance issue. But we are not out of the woods yet. It is still possible that the trade dispute could get ugly between China and the US.
Effectively managing China-US economic and trade relations, particularly in the context of geopolitical considerations, is one of the most significant challenges that face both Trump and his administration. The Trump administration would be well served by changing their protectionist approach and pursuing constructive engagement with China. The winners of that approach would not only be consumers and workers in China and the US, but also China-US relations and the global economy.
The author is a professor of political science at the University of St. Thomas in Houston, Texas. The views do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
On April 4, US President Donald Trump announced a series of punitive tariffs on up to $50 billion of Chinese exports to the United States, which Trump claims is designed to cut China's trade surplus with the US by $100 billion. In response, China released a preliminary list of retaliatory tariffs totaling $3 billion on products ranging from pork and soybeans to wine. While these products or commodities represent a tiny fraction of its US imports, they serve a symbolic purpose.
Why should we care about US pork, soybeans and wine imports? While China is not necessarily a large net importer of US pork products, it is the biggest buyer of US soybeans. China imported $14.2 billion of American soybeans in 2016 — about a third of the entire US soybean crop — primarily to feed about 400 million pigs and other livestock. The tariff on soybeans will have a detrimental effect on rural Americans.
In addition, while pork imports are not as important as they were a decade ago when the US was the leading supplier of China's pork imports, the US remains the second-leading supplier of pork after Germany. Imposing a 25 percent levy on US pork imports will hurt farmers throughout the US, but particularly in Iowa. Why Iowa? Because it is the top pork-producing state and just happens to be the home state of Terry Branstad, the US ambassador to China.
The 25 percent levy is a heavy blow to Iowa, a so-called swing state during US presidential elections. While it swung to Trump in 2016, it voted for Barack Obama in both 2008 and 2012. The pork levy could have a direct impact on Trump's chances in the state during the 2020 presidential election.
Further, China is the world's fastest-growing wine market and is a crucial market for US wineries. The number of consumers of imported wine in China has increased by roughly 250 percent, and wine sales have increased by almost 450 percent over the past decade. Most of those American wines come from California, Texas, Oregon and New York.
A tariff battle will seriously affect US wineries, particularly those in California, which account for nearly 90 percent of US wine exports to China. A continued battle over tariffs could have a permanently negative impact on the US wine industry. China's domestic industry continues to grow and is now the world's seventh-largest producer of wine. Chinese consumers could easily turn away from expensive, tax-induced US wines in favor of domestic wines or those imported from Europe, South Africa or Chile that are not subject to high taxes.
In January 2017, President Xi Jinping noted in his speech at the World Economic Forum in Davos that "No one will emerge as a winner from a trade war." Trump's path of pursuing vindictive import duties and tariffs is sure to result in tremendous harm, not only to Chinese and American consumers, but to the global economy.
Trump's trade tariffs are a losing proposition, motivated more by US domestic politics than sound economics. Simply put, his tariffs are not going to work and will likely have a negative impact on the economies of China and the US. Trump is engaged in fantasy if he believes imposing tariffs on a host of Chinese imports will have a positive impact and increase jobs in the US. Tariffs will ultimately make US exports less competitive, not more competitive, and they will result in the loss of American jobs and increased costs for American consumers.
Making Chinese imports more expensive adversely affects American consumers, particularly the working class and middle class. It is ultimately a lose-lose proposition for the US and China. Trump and his protectionist supporters have justified the tariffs by claiming that they will protect American workers from highly subsidized Chinese companies that sell steel and aluminum at low prices in the US market. But that is ludicrous given that 10 other nations export more steel to the US than China – and that the US steel market's share represents 70 percent of overall steel products. It will make automobiles, beer and soft drinks more expensive. Frankly, the tariffs smack of a political payoff rather than sound economic theory and are definitely not in the best interests of American workers or consumers.
China has shown a willingness to talk with Trump and his administration about economic issues. The key is how Trump reacts. Will he continue to posture or will he demonstrate a willingness to engage in cooperation? Will he expand his protectionist rhetoric and policies in a foolish attempt to escape economic globalization and "save" American jobs, or will he finally recognize that economic globalization is the key to both amicable China-US relations as well as an expansion of the global economy?
The tariffs imposed by Trump have more than just an impact on China-US economic relations, although that is an important feature. These tariffs have a ripple effect on our overall relations. They have an impact on our cultural, educational, social and scientific relations. They have an impact on the very nature of normalized China-US relations.
Fortunately, after two weeks of tension, the friction over trade between China and the US appears to have died down just a bit. The question is if this is a lull in the storm or the end of it. The timing of Trump's tariffs might give us a little bit of hope regarding the conflict between China and the US. Trump announced the tariffs immediately after President Xi Jinping had been re-elected by the National People's Congress and China had rolled out a series of significant institutional reforms. This suggests that while the US and China are engaged in a level of contention over trade issues, there continues to be a semblance of collegiality between Xi and Trump, which hopefully will lead to a win-win solution to the trade imbalance issue. But we are not out of the woods yet. It is still possible that the trade dispute could get ugly between China and the US.
Effectively managing China-US economic and trade relations, particularly in the context of geopolitical considerations, is one of the most significant challenges that face both Trump and his administration. The Trump administration would be well served by changing their protectionist approach and pursuing constructive engagement with China. The winners of that approach would not only be consumers and workers in China and the US, but also China-US relations and the global economy.
The author is a professor of political science at the University of St. Thomas in Houston, Texas. The views do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
