Donald Trump launches attack on Chinese trade
Tariffs will hurt America too
Now for the real fight. After unveiling tariffs on steel and aluminium which barely grazed China earlier this month, President Donald Trump took direct aim at Beijing on March 22nd. His move to hit China for its trade practices is designed to land three jabs. The first will take the form of tariffs of 25% on up to $60bn of Chinese exports to America. This, Mr Trump argues, is only a fraction of the economic damage China has done to America by stealing or forcibly extracting its companies’ intellectual property. The second blow will come in the form of investment restrictions on Chinese companies, to stop the Chinese from hoovering up American ideas and gaining a strategic advantage. The third will involve litigation at the World Trade Organisation.
China has broken the rules, the president thinks, and needs to be held to account. Plenty agree on that. China has not lived up to the expectations many had of it when it joined the World Trade Organisation back in 2001 (see briefing). Its challenge to American technological supremacy is real enough (see briefing). The metal tariffs have been handled chaotically and were controversial even within the administration; the desire to curb China’s bad behaviour commands much more consensus.
That does not make the Trump administration’s strategy on tariffs a good one. Mr Trump thinks that America’s position in a trade battle is stronger than that of the Chinese, because they send more stuff to America than goes the other way. But imports benefit Americans too. Slapping tariffs on over 10% of Chinese goods exports to America will hit shoppers. Even outfits who are hawkish on China, such as the Information Technology and Innovation Foundation, a tech-industry-funded think-tank, are critical of the idea of imposing tariffs on ICT products from China. It warns that this would hurt American productivity growth and benefit China's competitors rather than bringing any jobs back to America.
What would make matters much worse is Chinese retaliation. On the day of Mr Trump's announcement, Cui Tiankai, the Chinese ambassador to America said "if people want to play tough, we wil play tough with them." American agriculture exporters look especially vulnerable. Paul Burke, regional director of the US Soybean Export Council in North Asia, has heard talk of the Chinese commerce ministry meeting soybean consumers to ask how they would cope if access to American soybeans were to be curtailed. On March 20th the Global Times, a Chinese newspaper, published an editorial clamouring for tariffs, arguing that subsidised American soybeans were “an important reason for the world’s soybean oversupply”. Mr Burke thinks that soybeans are an example of how trade with China is working. Now it looks like the exporters he represents will be caught up in the fray.
Such is the self-destructive logic of trade wars. Mr Trump claims to be trying to avoid a scenario of punch and counterpunch. As he signed the punitive measures, he boasted that he was knee-deep in negotiations with the government in Beijing to lower America’s trade deficit with China by $100bn, from $375bn (in goods) in 2017. Set aside the question of whether Mr Trump’s dislike of deficits makes sense (it doesn’t). His latest action is unlikely to help those talks. The Trump administration has signalled that it would defend the interests of American farmers if the Chinese were to treat them unfairly. One blow always tends to lead to another.
China has broken the rules, the president thinks, and needs to be held to account. Plenty agree on that. China has not lived up to the expectations many had of it when it joined the World Trade Organisation back in 2001 (see briefing). Its challenge to American technological supremacy is real enough (see briefing). The metal tariffs have been handled chaotically and were controversial even within the administration; the desire to curb China’s bad behaviour commands much more consensus.
That does not make the Trump administration’s strategy on tariffs a good one. Mr Trump thinks that America’s position in a trade battle is stronger than that of the Chinese, because they send more stuff to America than goes the other way. But imports benefit Americans too. Slapping tariffs on over 10% of Chinese goods exports to America will hit shoppers. Even outfits who are hawkish on China, such as the Information Technology and Innovation Foundation, a tech-industry-funded think-tank, are critical of the idea of imposing tariffs on ICT products from China. It warns that this would hurt American productivity growth and benefit China's competitors rather than bringing any jobs back to America.
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Such is the self-destructive logic of trade wars. Mr Trump claims to be trying to avoid a scenario of punch and counterpunch. As he signed the punitive measures, he boasted that he was knee-deep in negotiations with the government in Beijing to lower America’s trade deficit with China by $100bn, from $375bn (in goods) in 2017. Set aside the question of whether Mr Trump’s dislike of deficits makes sense (it doesn’t). His latest action is unlikely to help those talks. The Trump administration has signalled that it would defend the interests of American farmers if the Chinese were to treat them unfairly. One blow always tends to lead to another.
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