Who is to pay for Trump’s trade war against China?

President Donald J. Trump and Japan’s Prime Minister Shinzo Abe leave the Akasaka Palace Monday, May 27, 2019, following their afternoon meeting at this Tokyo palace. (Official White House Photo by Shealah Craighead)

The US President Donald Trump and the big American tech companies have raised the stakes this week in the ongoing Pacific war. Japanese and South Korean tech giants have also joined the Americans in black listing Huawei and other Chinese companies in an all out war against China. As expected, Japan supports the US policy in South East Asia.

As for Trump himself, he declared ready to increase tariffs on additional Chinese imports of a value of $300 billion this time. In this way, he practically punishes all Chinese deliveries to the US. The American President confirmed he will raise the tariffs in case his meeting with the Chinese leader, Xi Jinping, at the G20 Summit of 28-29 June in Osaka ends without a result.

Punishing all Chinese exports…

The problem is, though, that the Chinese Foreign Ministry didn’t confirm there will be a meeting. It’s not even confirmed if Xi is to attend the G20 Summit at all. To be reminded, on the 10th of May Trump increased the tariffs on Chinese imports of a value of $200 billion from 10% to 25%.  With the full value of Chinese exports to the US in 2018 around $540 billion, the Americans are then ready to punish all the Chinese sales to the US.

…and Huawei

On the other front of the US attack against Chinese targets, a number of US tech giants have told their employees not to talk to the Huawei people. The US have targeted the tech giant Huawei Technologies Co Ltd and other Chinese firms as an additional weapon in the escalating trade war. According to Reuters “Chipmakers Intel Corp and Qualcomm Inc, mobile research firm InterDigital Wireless Inc and South Korean carrier LG Uplus have restricted employees from informal conversations with Huawei”.

Alarmingly enough, in this dangerous confrontation, we find that at the heart of Washington’s ultimatum lies a demand which is quite impossible to be met by the other side. Apart from the usual requests, one finds that the Americans ask China to drastically change or practically destroy her extremely successful strategy for economic development.

What do the Americans want?

The rest of the US demands, about stopping technological transfer and better access for American companies in the Chinese markets, can be rather easily met. However, this is not the case for the destruction of the substructures of the entire Chinese economy, which are based on the government’s multi-annual development plans.

In reality, the Chinese economy is not much less private than the US. The government in Beijing, however, retains the right to direct the economy to the more promising paths, a tool that the administration in Washington D.C. also cherishes. So, at the heart of the US demands lies a hollow shell full of American aggressiveness.

Who is to pay?

Last but not least, the US-China escalating trade war has already had an adverse impact on the rest of the world. Europe is again heading to recession, having already marked last month some very low growth and inflation rates scores. Pressing interest rates further down in the negative part of the chart and spreading around more cash by the European Central Bank won’t remedy the euro area malaise.

What if a new accident happens and the world is hit by a new financial meltdown? Who is going to pay the cost this time? Can the usual suspects – which are the hard working billions of people – again save the global economy from collapsing? Looking at the latest developments in the US, Europe and China we can tell who is again going to pay the price and how.

Comments

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