TWN Info Service on WTO and Trade Issues (Sept19/01)
12 September 2019
Third World Network

Trump severely criticised for escalating trade war with China

Published in SUNS #8971 dated 4 September 2019

Geneva, 3 Sep (D. Ravi Kanth) – United States President Donald Trump has come under intense criticism from his domestic business and trade lobbies for escalating the trade war with China at a time of growing recessionary fears in the US economy.

[When the previously announced tariffs of 15% on $125 billion worth of imports from China took effect at 12 AM (Washington time) on 1 September, China retaliated a minute later with higher tariffs being rolled out in stages on a total of about $75 billion of US goods. See – SUNS]

As another round of US unilateral tariffs of 15% on imports from China, worth more than $125 billion, took effect on 1 September, the US Chamber of Commerce cautioned President Trump that he is adopting the wrong tactic for forcing China to change its alleged unfair practices.

The US administration has also indicated that it would impose additional tariffs of 15% on $156 billion of Chinese imports such as smartphones, laptops, toys and video games among others from 15 December.

Further, the US Trade Representative Ambassador Robert Lighthizer and his office have begun public hearings to impose tariffs on $300 billion of Chinese imports after the current round of tariffs.

Meanwhile, China appears to have lodged a complaint at the World Trade Organization (WTO) on Monday (2 September) against the latest round of US tariffs; the detailed complaint was not available at the WTO website as of the moment of writing.

But pressure is growing within the US industry over the worsening impact of President Trump’s trade war against China.

“The escalating trade war between the US and China is rippling through the global economy, hurting confidence among US small businesses, crimping trade among industrial giants in Asia and hitting export-oriented factories in Europe,” The Wall Street Journal noted grimly on 2 September.

Apparently, economic confidence among small US companies fell in August to the lowest level since November 2012, according to a monthly survey of more than 670 small companies conducted for The Wall Street Journal.

“The tariffs – import taxes by another name – are or will cost every American household between $600 and $1000 (annually),” said Myron Brilliant, head of international affairs at the US Chamber of Commerce, according to a report in The Wall Street Journal on 2 September.

According to a paper published by the Federal Reserve Bank of New York, the unilateral tariffs imposed by President Trump before the latest hike of 15% in import duties on Chinese goods have led to an additional cost of $831 a year per household.

Until now, the US had slapped tariffs of 25% on around $250 billion of Chinese imports.

President Trump had indicated that he would impose another 5% tariffs in October as a “penalty” on China.

The AFL-CIO, the largest trade union in the US, expressed concern over President Trump’s tactics against China in the worsening trade war.

“To take on China, there has to be a multilateral approach – one country can’t take on China to try to dry up its overcapacity because they just send it through to you in other ways,” Richard Trumka, the AFL-CIO President, told Fox News on Sunday.

But President Trump seems to have turned a deaf ear to criticisms from the trade lobbies about the negative impact of the trade war on the American economy.

Tariffs on Chinese goods are “absolutely worth it, we don’t want to be servants to the Chinese!”, President Trump maintained on Sunday.

In a series of tweets on 1 September, President Trump insisted that China can’t be allowed to “rip us anymore as a country.”

“We can’t allow China to take $500 billion a year out of our country. We can’t do that.”

He said that the 15% tariff will not impact US consumers “that much” because China is artificially lowering the value of its currency.

The US President goaded the American importers to find new suppliers outside of China.

He said that the tariffs have actually made US farmers better off because of the $16 billion in assistance his Administration is providing to farmers impacted by China’s retaliatory tariffs, according to a report in the Washington Trade Daily on 1 September.

“I’m making the farmers more than whole,” Trump said. “The farmers are doing better than if China, frankly, were buying. I’m taking a piece of the massive amount of tariffs, and we’re giving them to the farmers who have been targeted unfairly by China.”

President Trump also claimed that China is “in a bad situation” as some 13% of certain companies “are going to be leaving China in the not-too-distant future.”

“I think it is going to be much higher because they cannot compete with the tariffs (imposed on the Chinese goods) and they can’t compete,” he argued.

American companies, which seem frustrated with their administration’s trade war with China, “are now scrambling to limit their exposure to China, in some cases shifting production to other countries, like Vietnam, to avoid tariffs that will soon reach as much as 30%,” the New York Times suggested on 1 September.

In response to the US action, China has levied 5% additional tariff on American goods from Sunday, including the American crude oil products for the first time.

China has included several politically-sensitive items in its list of $75 billion of American products, particularly farm products from the mid-west American states that are crucial for President Trump’s electoral prospects for a second term next year.

China has levied additional tariffs of 5% and 10% on 1,717 items of a total of 5,078 products originating from the US.

In addition to the unilateral tariffs, the US administration has upped the ante by imposing new restrictions through export controls that would curtail American companies from providing sensitive technology products.

The US-China trade war that began last year is now entering a period of rapid escalation as China has made it clear that it will not yield under pressure to President Trump’s threats and demands that call for major structural changes in the Chinese industry and economy.

The US wants China to enforce stringent intellectual property laws to stop the alleged theft of technologies and discontinue the mandated practice of transfer of technology and eliminate industrial subsidies.

According to a report in The Economist issue of August 31-September 6, President Trump succeeded in forcing Japan and the European Union countries, especially France, at the G-7 leaders’ meeting in Biarritz, France, last month, to agree to Washington’s demands such as more purchases of soybeans and beef by Japan and phased removal of France’s digital tax on services.

But Trump has not been able to clinch such a victory with China which is yet to show any signs of backing down from its unwavering positions for balanced outcomes, The Economist suggested.

Even as the two sides are scheduled to hold a crucial round of negotiations this month, the prospects for an early breakthrough seem grim.

“The trade war has been kind of on a slow burn for a while, but things are now really ramping up in a hurry,” according to Chad P Bown, a senior fellow at the Peterson Institute for International Economics, who was quoted in a news report in the New York Times on 1 September.

China has maintained that it is prepared to agree to a balanced deal with the US involving the removal of tariffs on Chinese goods as well as the restrictions on the sale of sensitive technology products to Chinese telecom companies, particularly Huawei, said several analysts.

In an op-ed piece on 1 September, China’s Global Times wrote that “US shoots Americans in the foot” by imposing fresh tariffs of 15 percent on $125 billion of Chinese imports starting midnight on Sunday.

Acknowledging that China also applied new tariffs ranging from 5 to 10 percent on the first batch of $75 billion of US goods on the same day as a countermeasure, the Chinese publication maintained that the “new wave of tariffs is a turning point in the trade war.”

Without naming President Trump, the Chinese publication said “Washington is almost at the end of its wits.”

“However, the US underestimated China’s resilience in the trade war. Therefore, Washington would rather damage itself now in an attempt to make China surrender,” the Global Times argued.

“The Trump administration acts as if it doesn’t care about these voices [in the Western media], but it actually does, especially when the 2020 election campaign is underway,” it suggested.

Further, according to the Global Times, the US economy “cannot sustain its superficial prosperity and is facing a bigger risk of decline. US GDP growth was 2.1 percent in the second quarter of 2019, 1 percentage point lower than the first quarter. The trade war’s impact on US imports and exports becomes more and more apparent.”