OPINIONS Observer: US can’t launch trade war without backfiring

OPINIONS

Observer: US can’t launch trade war without backfiring

By Chen Lidan | People's Daily app

21:33, July 11, 2018

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US President Donald Trump justified the tariffs on $34 billion in Chinese goods in the name of protecting US workers, and proposed $200 billion more to come. But these measures are a wrong approach against a wrong target to its own problem. 

A Chinese foreign ministry spokesperson said on Wednesday that China will definitely take countermeasures to defend its legitimate rights, adding that it’s a war between strong power and rules, unilateralism and multilateralism.

If harsh tariffs are the panacea to address the US trade imbalance, Trump wouldn’t need to cry foul on Japan’s trade surplus with the US, which has been sustained for over three decades.

In the 1980s, Japan was the country with the largest trade surplus with the US, which subsequently slapped a 100-percent tariff on Japan's electronics shipments and forced it to agree to sharp rise in yen’s value. 

Meanwhile, the minor US-Japan trade war 30 years ago neither overturned Japan's surplus nor put an end to the US trade deficit since 1975. 

If Trump really wants a quick fix to slash its trade deficit with China and save more manufacturing jobs at home, the first thing to do would be to liberalize export controls.

The Carnegie Endowment for International Peace, a leading US think tank, said in a report last year that if the US were to lift export barriers against China to the same level as those applied to France, US exports to China would increase by an estimated $45.7-76 billion, narrowing the deficit by 20.3 to 33.7 percent. 

With an impulse to satisfy steel and aluminum workers in the Rust Belt states and an ignorance to trade rules, Trump proclaimed that trade wars are good and easy to win. 

The US fired the first shot and has threatened more rounds of tariffs. The EU, China and Canada retaliated. The question is: Would trade disputes be spiraling in Trump’s favor?

He may declare victory by winning back hundreds of steel and aluminum industry jobs, but economists and business leaders have warned that US tariffs would cause thousands of job losses in other industries. Manufacturers may be forced to lay off workers to offset the rising costs due to more expensive imports. 

Nearly every state will be hit hard by the trade tit-for-tat and Trump’s biggest voter bases will likely be the most vulnerable. In the 30 states Trump won in the 2016 election, $36.5 billion in goods will be affected by retaliatory tariffs from China, the EU, Mexico and Canada, said the US Chamber of Commerce, a business group that used to closely allied with Republicans. 

Harley-Davidson’s decision to relocate part of its factories overseas shows that warnings against a trade war aren't a false alarm. If Trump and his hawkish advisers continue the zero-sum thinking on trade, the US will suffer from long-term repercussions. 

Since the early stages of the China-US trade dispute, Chinese leaders made it clear that China is not pursuing a trade surplus with the US. As China transforms its economy into a consumption-powered growth model and more sectors welcome international investors, protectionism would alienate US exporters and entrepreneurs from the promising Chinese market. 

Given the intertwined nature of the Chinese and American economies, it is wishful thinking for the US to slap China without backfiring. A myopic and capricious approach to complicate trade and economic issues would steer the world's largest economy nowhere. 

Before the China-US trade conflicts unleash substantial damage to both economies and poison other aspects of their bilateral ties, Washington policymakers need to calm down and return to the track of rational negotiations. 

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