China Responds to Trump’s Trade War
Ian Wright posted on November 14, 2016 |

Left: President-Elect, Donald Trump. 

Right: General Secretary of the Central Committee of the Communist Party of China, Xi Jinping.

Much like the holiday season, after so much build-up it’s hard to believe that the election season is finally over. This cycle, the U.S. was surprised to unwrap a Trump victory, leading many to wonder about what the next four years will bring for the country and the world.

One of the president-elect’s central campaign promises was to bring manufacturing jobs back to America by imposing tariffs on foreign goods—particularly those from China and Mexico.

In response to comments by economist and potential Trump advisor Judy Shelton in an interview with Bloomberg Television, China’s Global Times published a brusque editorial excoriating Trump’s suggestions that he would declare China a currency manipulator and impose harsh tariffs on Chinese imports.

“To impose a 45 percent tariff on imports from China is merely campaign rhetoric,” the editorial stated. “The greatest authority a US president has is to impose tariffs of up to 15 percent for 150 days on all imported goods and the limit can only be broken on the condition that the country is declared to be in a state of emergency. Other than that, a US president can only demand a tariff increase on individual commodities.”

The paper goes on to reference a 35-percent import tariff on Chinese tires by U.S. trade and commerce authorities after President Obama took office in 2009. “In response, China took retaliatory steps of imposing tariffs on US chicken and automotive products,” stated the editorial. “Both China and the US suffered losses as a result.”

This sort of mutually assured economic destruction would be a bold move by the Chinese government, but given Trump’s aggressive rhetoric regarding foreign imports, threats of this nature may be the best hope the country has of maintaining trade relations with the US.

U.S.-China Trade Relations

China is currently the largest U.S. trading partner, with USD $598 billion in total goods traded between the two nations in 2015.

Of that $598 billion, U.S. exports to China amounted to $116 billion, while goods imported from China amounted to $482 billion. This means the U.S. goods trade deficit with China was $366 billion in 2015, a 6.6 percent increase over 2014.

For comparison, goods traded with the United States’ second largest trading partner, Canada, totaled $575 billion in 2015, with exports at $280 billion and imports at $295 billion, resulting in a $15-billion goods trade deficit, a 57.1 percent decrease over 2014.
Source: Office of the United States Trade Representative.
It’s also worth noting that China’s total exports for 2015 amounted to $2.15 trillion, meaning that the U.S. accounts for 22 percent of China’s exports.

Nevertheless, the Chinese and U.S. economies are so closely tied together that taking the metaphorical “nuclear option” and imposing severe tariffs on Chinese imports would likely have dire consequences for both countries, not to mention the rest of the global economy. Instead, what we may be witnessing is the start of a new economic cold war between the two trade superpowers.

If that’s the case, then we should expect to see the conflict play out primarily via proxy states—the developing economies in Africa spring to mind. Trump’s campaign promises and the editorial in Global Times suggest that the sabre-rattling has already begun.

“China will take a tit-for-tat approach then,” the article’s author wrote. “A batch of Boeing orders will be replaced by Airbus. US auto and iPhone sales in China will suffer a setback, and US soybean and maize imports will be halted. China can also limit the number of Chinese students studying in the US.”

All of this evokes one more parallel between the holiday and election seasons: once all the surprises have been revealed, no one is eager to start the necessary cleanup.

Will Trump impose tariffs on Chinese imports? Will China strike back if he does? Comment below.

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