View risks of a trade war objectively

Source:Global Times Published: 2019/5/8 22:18:40

The risks are increasing that the China-US trade war will escalate. In a worst-case scenario in which the US raises tariffs on all Chinese goods, this will exert a certain impact on China's economic operations which cannot be ignored or exaggerated.  

According to Washington's threats, the US will impose a 25 percent tariff on essentially all Chinese imports worth nearly $600 billion in the end. This could hardly be done in the real situation. Even if tariffs are raised on some goods, that doesn't mean they cannot be sold to the US. 

China's exports to the US account for about 16 percent of China's total exports. That is to say, after the US comprehensively raises tariffs, in the worst case, probably about 8 percent of China's exports need to be digested by other channels. Some economists hold there is a strong possibility that half could be digested. In this way, only 4 percent of China's exports would be affected. 

Tariffs of 10 percent on $200 billion of Chinese imports and 25 percent tariffs on all Chinese goods are two different concepts. The US imports from China take up more than one-fifth of its total imports. Imagine if the Chinese government levied a 25 percent tariff on over one-fifth of China's imports, what a negative impact that would have on Chinese economic operations and the lives of ordinary Chinese people.  

Imported products would be more expensive. Many companies and retailers would have to immediately find new suppliers. It would be an annoying and chaotic process. Consumer products in the US market, from electronics, toys to bicycles, would see further price rises. The federal government would rake in more tariffs, but ordinary people would have to pay more. Imagine the complaints.

Both parties in the US support a hard-line stance against China, but once the general election kicks off, the Republican government will be fully blamed for messing up the US economy and irritating consumers. It would be a huge political risk for the Republican Party to run for re-election amid a comprehensive trade war with China. 

The US can't expect to crush China by applying maximum pressure. Without a deal with Beijing, Washington won't be able to achieve major progress in negotiations with other big economies such as Europe and Japan. The North Korea nuclear issue is also stalled. The foreign policy offensive of which the current US government is proud has hit obstacles on many fronts. It would become a laughing stock in the election campaign.

The US government was the initiator of the irrational trade war. Washington arrogantly believes it can arbitrarily determine the rules of China-US trade. If the trade war lasts till the 2020 general election while the US gains nothing but a turbulent financial market, that would be the biggest political joke in economic history. 

With strong leadership of the Communist Party of China and the institutional advantage of maintaining unity in the face of difficulties, China is fully capable of digesting and controlling the losses caused by the reduction of exports to the US. China doesn't want a trade war and hopes to reach an agreement as soon as possible. Washington shouldn't force China to strike back.

Posted in: EDITORIAL

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