Some of the White House’s advocates of “America First” ideology believe that trade instruments which prevented Japan’s rise in the 1980s would do the same thing for China. However, the two countries are widely different and same measures cannot be applied in this trade war. On Tuesday, China confirmed that anti-dumping duties on sorghum that arrives from the United States would be imposed. China is the largest buyer of sorghum from the US, spending around $1 billion per year, but this may soon become a thing of the past.
If this trade is disrupted, Trump will not receive the same support as he did in the 2016 election. A majority of the sorghum is produced in the US south, and these states are mostly republican. Here is how Trump managed to undermine trade in just a few weeks.
In March, a global tariff of 24 percent was introduced on steel imports as well as 10 percent on aluminum imports. Later that month, his administration made a case against Chinese technology which is licensed in the WTO and slates of tariffs were introduced, at $50 billion on Chinese products. Did you expect China to remain silent? They imposed tariffs on $3 billion worth of US goods. At the beginning of April, China also increased the taxes of up to 25 percent on 128 products from the United States, because of the USA-imposed steel and aluminum tariffs. Furthermore, China launched $50 billion in tariffs on a bunch of products from the United States such as cars, chemicals and soybeans and Trump threatened to introduce $100 billion in tariffs against China. Is this an endless and pointless trade war?
While the US is applying the familiar tactics – divide and rule – they might get a slap in the face from the country which economy is in a severe jump. China will not sit quietly as the US is imposing tariffs and they will return with same measures. What are some of the options for China to defend its economy against this nonsensical trade war?
First of all, they could defer trade and investment agreements which Trump signed when he visited China. Furthermore, banning the import of genetically modified products to China would raise the stakes and it could possibly start a wave of other countries taking the same measures. Genetically modified products are banned by many countries, and while the GMO products are stuck in the approval process in China, they will develop their GMO sector.
As we have already mentioned, disrupting the trade with China will hit blue-collar workers and farmers across the country. And they are the ones who brought Trump into power. Obstructing Chinese investment would be severe for the United States because China has other options. Hitting the US service could be beneficial because more than half of the $39 billion US surplus comes from Chinese people who are traveling and studying in the United States. Washington has already blocked visas to Bejing, so why should the Chinese government allow their tourists and people to visit the United States?
China is the largest foreign holder of the US Treasuries with $1.2 trillion of US debt. Some other foreign holders of the US debt are Japan, Hong Kong, Korea, Russia, and Brazil. With everything that has been going on, China might decide to sell the debt which would force Washington to take a different approach to cover the sustained deficits. The prolonged trade war will also undermine the US relationship with the NAFTA partners as well as the EU allies.
This trade war looks endless, and according to a growing number of reports, Trump’s administration plans to ratchet up the pressure against China. This could only backfire, and President Xi Jinping said that in a trade war “no one will emerge as a winner.” And he is right!