A 'mellowed' Trump no reason for Beijing to be complacent
As trade tensions ratchet up between the world's two largest economies with US President Donald Trump directing the US Trade Representative last week to identify Chinese goods worth $100 billion for additional tariffs, some academics are trying to explain the chaos.
Economic globalization is at a crossroads, with trade protectionism and unilateralism on the rise, Jon Taylor, a professor of political science at the University of St. Thomas in Houston, Texas, said on Tuesday.
As Trump moves the US away from global institutional rules, President Xi Jinping's vision, re-emphasized at the Boao Forum for Asia on Tuesday, promotes China's alignment with globalization principles, principles the US appears to be abandoning, Taylor said.
While some other analysts have said the US' actions will not resolve the trade conflict, Joseph E. Stiglitz, the 2001 winner of the Nobel Prize for economics, stressed: "The trade skirmish between the US and China on steel, aluminum, and other goods is a product of… Trump's scorn for multilateral trade arrangements and the World Trade Organization, an institution that was created to adjudicate trade disputes."
Trump's instruction to the USTR comes after the US administration announced additional tariffs on Chinese imports worth $50 billion on April 3, which forced China to respond by slapping 25 percent tariffs on US soybeans, corn, airplanes and automobiles. And although China has filed "a request for consultation" with the US under the WTO dispute settlement framework, it has made clear it will not hesitate to strike back against the protectionist moves.
"China's response has been firm and measured, aimed at avoiding both escalation and appeasement, which, when dealing with an unhinged bully, only encourages more aggression," Stiglitz said in a Project Syndicate article on Thursday. Stiglitz, who is also a former World Bank chief economist, is among those experts who believe reducing imports from China is not likely to create jobs in the US－rather it will increase prices for US consumers and create jobs in countries that step in to replace the imports from China.
According to experts, 37 percent of US imports from China are intermediate products, which American companies use in order to become more competitive. "Putting tariffs on intermediate products is shooting oneself in the foot," says an analytical study titled "Why a trade war with China would hurt the US and its allies, too" by David Dollar, a senior fellow at John L. Thornton China Center of the Brookings Institution, and Wang Zhi, director of Research Center of Global Value Chains at the University of International Business and Economics.
On the other hand, Stiglitz emphasized: "Even if Trump had no economists advising him, he would have to realize that what matters is the multilateral trade deficit, not bilateral trade deficits with any one country."
Moreover, calling China a pillar of the multilateral system, United Nations Secretary-General Antonio Guterres said trade wars are bad not only for those involved but also for the global economy. The international framework governing global trade is of extreme importance, with the WTO at its center, he said in New York on April 6, adding: "Free trade is a very important contributor to global prosperity."
And Marie Kasperek, associate director of the global business and economics program at the Atlantic Council, argued that Trump's focus on pure trade deficits is insufficient a reason and imprudent a way to evaluate Sino-US trade relations. "After all, a trade deficit simply describes a situation in which domestic investment is bigger than national savings," she said. While Kasperek said it was hard to predict how the situation would develop, the good news is that nothing is set in stone yet.
That may be true, as Trump softened his tone in his Sunday tweet, saying, "President Xi and I will always be friends, no matter what happens with our dispute on trade." But the fact that he also tweeted, "China will take down its trade barriers because it is the right thing to do", shows his mellowed tone could be just a ploy, given his known "scorn for multilateral trade arrangements and the WTO".
The author is deputy editor-in-chief of China Daily USA. firstname.lastname@example.org