Foreign Affairs
The US-China Trade War Is About To Escalate In A Big Way
The Prime Minister, Shri Narendra Modi in a bilateral meeting with the President of the People's Republic of China, Mr. Xi Jinping, in Tashkent, Uzbekistan on June 23, 2016.
After months of threats, minor jabs, and failed negotiations, the U.S. and China are preparing to escalate the trade war in a very serious way.
The world’s top two economies are set to impose tough tariffs on each others products to the tune of tens of billions of dollars annually Friday.
The U.S. is expected to slap a 25 percent tariff on 818 Chinese products worth an estimated $34 billion Friday, part of a broader package of tariffs on a total of 1,100 Chinese goods worth $50 billion. These tariffs, designed to punish China for its egregious theft of American intellectual property and unfair trade practices, could be followed by trade penalties on goods worth several hundreds of billions of dollars.
Beijing decided in June that if the U.S. proceeds with its plans to impose tariffs on Chinese products, it will immediately return fire, imposing reciprocal tariffs on 545 American goods worth about $34 billion. The commission said Wednesday that it will not make any move on this issue until the U.S. does, according to the state-run Xinhua News Agency. Targets could include soybeans, seafood, and crude oil, among other U.S. goods.
“The United States will be opening fire on the whole world and also opening fire on itself,” Chinese Commerce Ministry spokesman Gao Feng told reporters Thursday. He further stressed that China “will never fire the first shot,” but it will have no choice but to “strike back.”
“China will not bow down in the face of threats and blackmail and will not falter from its determination to defend free trade and the multilateral system,” he said.
Beijing appears to view the Trump administration’s recent actions on trade as an attempt at containment, a clear existential threat. “Washington cannot contain China’s growth through a trade war,” national tabloid The Global Times warned Thursday. “If the U.S. is determined to escalate conflicts with China, then so be it. Perhaps the Trump administration can only clear its mind after a fight.”
A leaked memo to Chinese media recently put the trade war in the context of combating U.S.-led containment of China. “The trade conflict is really a war against China’s rise, to see who has the greater stamina.”
The U.S. is concerned about Chinese predatory practices, which Washington considers an unfair and unlawful attempt to overthrow the U.S. as the supreme economic and technological power. In particular, the U.S. is concerned about Beijing’s ambitious “Made in China 2025” plan, a questionable strategy designed to ensure Chinese dominance in several key emerging industries.
If the Trump administration follows through on its threats to impose tariffs on four or five hundred billion dollars worth of Chinese products, China may respond with non-tariff measures, inevitably taking the fight into new domains.
The U.S. believes it has the edge in the coming fight, a view Beijing does not share. “China has more to lose. They have a choice to make,” White House trade adviser Peter Navarro said in June, adding, “The numbers speak for themselves. Do the math.” While many leading experts agree that China, all things being equal, stands to lose more in a trade war, the U.S. would by no means emerged unscathed in such a conflict.
The escalation of the trade war is expected to have far-reaching, global consequences.
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