US-China trade war at point of no return: Washington’s demands go beyond tariffs

This is when and how the trade war begun. On Tuesday January 23, 2018 in the Oval Office of the White House, in Washington D.C., US President Donald Trump signed Section 201 Action to provide relief to US manufacturers, by imposing extra tariffs on imported washing machines and solar cells and modules. Official White House photo, by Shealah Craighead.

It seems the US-China trade conflict, if not full scale trade war, is entering the phase of no return. Nothing will be as before in the economic and otherwise relations between the two largest economies of the world. Washington appears ready to push its cause to the end, while Beijing still pretends not to understand it. The Americans insist on their demands, which reach far beyond tariffs touching some structural pillars of the Chinese economy. The White House says it’s about misappropriation of U.S. intellectual property and the industrial subsidies Beijing allegedly freely employs.

But China has become what she is today by absorbing western technology and running a centrally planned economy, having made subsidies its very structural base. During the last years though, things have evolved in China and the functioning principles of the Chinese economy have dramatically changed. Beijing now promotes the idea of China being a market economy. This allegation can be adequately defended. The country has two giant capital markets, the Shanghai Stock Exchange and the Shenzhen Stock Exchange, which by and large have substituted the role of central planning in regulating the use of the factors of production; capital, labor and nature.

Markets in place of central planning

This observation aspires to take care of the key issue of how production of goods and services is organized and functions in the vast country. There are much stronger arguments though to defend the market economy status, in the distribution system of goods and services. Within China prices of goods and distribution channels are set and organized more or less in the same way as in the ‘western capitalist world’, by demand and offer, expressed by billions of decisions taken by producers and consumers.

Now if the White House wants to denounce the truly strong Beijing government interference in the structuring and functioning of the Chinese financial system, it has better look elsewhere for arguments. The latest meltdown of the western financial system in the crisis years of 2008-2010 was just stopped from destroying the real economy of major westerns countries by the use of some trillions of government dollars, euros and pound sterlings. Still today the western financial system doesn’t fall apart because everybody knows that the government will intervene and save the bankrupt banks. If this is not government interference words have lost their meaning.

Who is more market oriented?

In reality the administration of practically all the major ‘capitalist’ western countries acts as the lender of last resort and the ultimate insurer of each entire financial system. In comparison, the Chinese system is actually more people friendly and democratic than the western arrangement which favors the banks and the bankers instead of producers. In contrast, the Chinese deal uses the banks as instruments to favor production and employment for the masses, not the bankers. Those simple arguments leave Trump’s ‘America Fist’ strategy, as a naked and unprovoked declaration of war against China.

Back to the latest developments, last week’s the US-China trade talks ended without issuing a joint statement. The two days deliberations in Washington, involving mid level officials from the two sides, produced no results at all. It’s even more discouraging that no new meeting was set. This leaves the trade confrontation to what the White House plans for the next two months. Up to now the two sides have implemented tariffs on goods worth $50 billion for the other’s exports.

Threatening all trade

The US administration though under the orders of the President, is preparing a new mammoth package of tariffs on imported Chinese goods worth $200bn. In total the Chinese exports to the US amount to $500bn, leaving a surplus for Beijing of not less than $355bn. Last June the U.S. Commerce Secretary Wilbur Ross, on official visit to Beijing, failed to convince the Chinese to increase their imports of American soybeans and liquefied natural gas (LNG). Washington’s rhetoric goes as far as threatening all the $500bn of Chinese exports to the US.

Under these conditions, reliable commentators estimate that the Chino-American trade war is to escalate. The same sources observe though, that the two sides are careful not to let their trade differences spill over to other, more dangerous areas. Still the trade war has already touched the real economy, with China paying the larger cost. So far the impact is estimated at 0.3% – 0.5% of the country’s GDP.

America prospers

On the American side though the New York Stock Exchange breaks its capitalization records one after the other, in what is the longest Bull period for stock prices in history. For more than nine years now NYSE is jumping from one summit to another. Growth is also robust in the real US economy. Obviously then the Trump administration emboldened by the robust performance of the American economy is not going to ease up the pressure on China, at least not before the mid-term elections in the Congress this November. The Republican electoral base is thrilled with Trump’s tough stance towards China.

Nevertheless, this may be the good outlook. The precarious prospect may be that the Trump administration will continue embarrassing the global trade relations and order throughout their four years term. In any case even if Trump is not to seek reelection in 2020, the ‘America first’ narrative is there to stay. China and Germany are to feel the heat.

 

the sting Milestone

Featured Stings

How to build a more resilient and inclusive global system

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

Stopping antimicrobial resistance would cost just USD 2 per person a year

China is a renewable energy champion. But it’s time for a new approach

250+ senior claims leaders under one roof, exchanging transformation strategy

More needs to be done to bridge the digital gender divide

Parliament commemorates the liberation of Auschwitz 75 years ago

Upgraded EU visa information database to increase security at external borders

Khashoggi murder trials must public and meet international standards, UN expert urges

How LA plans to be 1.6°C cooler by 2050

Seize the opportunities of digital technology to improve well-being but also address the risks

Women’s work faces the greatest risk of automation, says new research

Is a deal over EU budget possible today?

‘Global sisterhood’ tells perpetrators ‘time is up’ for pandemic of violence

WEF Davos 2016 LIVE: “CO2 is not the problem, it is the symptom”, the pilots who crossed the world using solar energy cry out from Davos

“The Belt and Road Initiative should be mutually beneficial for EU and China and every participating country”, Vice-President Papadimoulis of the European Parliament underscores from European Business Summit 2018

Single Market Scoreboard 2020: Member States need to do more to ensure the good functioning of the EU Single Market*

This is what the UK’s major supermarkets say about plastic packaging and the environment

MEPs demand an end to migrant deaths across the Mediterranean Sea

Pakistan’s digital revolution is happening faster than you think

Syria still suffering ‘staggering levels’ of humanitarian need, Security Council hears

From low-earth orbit, ‘envoys’ of humanity join UN space forum

Find unity ‘to halt Libya’s senseless unraveling’, UN envoy urges Security Council

Burnout is a pandemic. Why don’t we talk more about it?

UN chief extends condolences to families of China landslide casualties

Quashing myths on 2019-nCoV for better public management

DR Congo Ebola centre attacks could force retreat against the deadly disease, warns UN health chief

EU-Ukraine Free Trade Agreement sees the light as Moscow’s reaction once more looms

How speaking ‘parentese’ to your child could make them a faster learner

Five-year low inflation for Eurozone and now Mario has to finally wake up the Germans

Idai disaster: Stranded victims still need rescue from heavy rains as UN scales up response

EU-China: Council authorises signature of the agreement on geographical indications

War in Syria: ‘Carnage’, flouting of rights and international law, must stop: Guterres

Youth Forum welcomes European Commission proposal to speed up financing for youth employment

MasterCard at European Business Summit 2015: A focus on innovation will drive inclusive economic growth for Europe

Is technology key to improving global health and education, or just an expensive distraction?

Rule of Law: European Commission refers Poland to the Court of Justice to protect judges from political control

What is behind the wide reach of  fake news about Coronavirus?

EU-Vietnam trade agreement enters into force

Why impoverishment and social exclusion grow in the EU; the affluent north also suffers

COVID-19 and nature are linked. So should be the recovery.

Corporate tax remains a key revenue source, despite falling rates worldwide

Residents and visitors to this Dutch neighborhood could share a pool of cars and bikes

Europe might not avoid new partitioning on Ukrainian crisis

Draghi to hold on zero interest rates until he leaves ECB

This is how drones and other ‘tradetech’ are transforming international trade

Empathy and human connection: how businesses can respond to COVID-19

UNICEF reports uneven progress in 30 years of child rights treaty

3 important lessons from 20 years of working with social entrepreneurs

United States: UN chief ‘deeply saddened’ by deadly California wildfires

Coronavirus: Commission Statement on consulting Member States on proposal to further expand State aid Temporary Framework to recapitalisation measures

Europe united in not supporting a US attack on Syria

These are the world’s 10 most competitive economies in 2019

Apple’s tax avoidance scheme remains as creative as their new iPhone

Practicing healthcare: Skills of a good healthcare professional and its effects

The European Sting live from the World Economic Forum 2015 in Davos

How global tech companies can champion ethical AI

Parliament wants to suspend EU accession negotiations with Turkey

‘Fire-fighting approach’ to humanitarian aid ‘not sustainable’: Deputy UN chief

This is the critical number that shows when housing breaks down

Horn of Africa: UN chief welcomes Djibouti agreement between Eritrea, Ethiopia and Somalia

Guterres appeals for ‘maximum restraint’ over Jammu and Kashmir, as tensions rise

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s