Trump’s moves toward trade war will backfire on US economy without hurting China

By Xiao Xin Source:Global Times Published: 2018/3/15 22:48:40

It's just an illusion that US President Donald Trump's moves toward a trade war could possibly daunt China. Any such trade war based on the erroneous belief that it's intended to benefit the US would only end up backfiring on the world's largest economy.

Apparently, the Trump administration has been escalating a trade fight with the international community, notably China.

Adding to trade war fears stoked by Trump's steel and aluminum tariff announcement on March 1 was news that Larry Kudlow, Trump's new chief economic advisor, on Wednesday resorted to hawkish trade rhetoric against China.

One may wonder why the Trump administration would risk being denounced as a traitor of free trade. It might actually be the case that the US president, addicted to a belligerent style, is making a miscalculation by attacking China on the trade front. China's trade surplus with the US, it seems, has been mistakenly considered as a bargaining chip to get China to bow to US pressure.

It is true that China's merchandise trade surplus with the US has widened so far this year compared with the same period in 2017, despite a slightly narrower reading last month. Chinese customs figures show that the country's trade surplus with the US totaled $20.96 billion in February, compared with $21.9 billion in January.

Nonetheless, the surplus, which is equivalent to only a small fraction of China's GDP, by no means justifies the belief that China cannot afford to go into a trade war.

In a note circulated on Wednesday, UBS Securities economists led by Wang Tao also illustrated how small the macro impact would be on China of US trade actions. The economists estimated that, as a rule of thumb, a 10 percent tariff on all Chinese exports to the US would mean a drop of a 2 percentage points in China's total export volume growth and a 0.3 to 0.4 percentage point slide in China's real GDP growth.

What's more, China's electronics and technology exports, accounting for more than 40 percent of its total exports to the US, are mostly assembled products using components from other nations such as Japan, Germany and South Korea or put together in factories in Southeast Asian countries like Vietnam and Thailand. It means a continuation of Trump's reckless belligerence would pit the US against the rest of the world.

A word from the wise for Trump: The US should recalculate the "benefits" of trade wars and move away from the road to ruin.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn



Posted in: EYE ON ECONOMY

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