Illustration: Xia Qing/GT

US President Donald Trump on Thursday suddenly announced on Twitter that starting from September 1, the US will impose an additional 10 percent tariff on the remaining $300 billion worth of Chinese exports to the US. It means that all Chinese exports to the US will be subject to additional tariffs. The move came just as the latest round of US-China trade talks had ended in Shanghai and both parties agreed to resume negotiations in September. Moreover, on July 26, Trump ordered the US Trade Representative in a memo to "use all available means to secure changes at the WTO" that would prevent self-declared developing countries from claiming developing country status. Trump said if the US decides the WTO has not made "substantial progress" after 90 days, it will unilaterally take action. Extending from bilateral to multilateral, the US' "extreme pressure" strategy has reached a height in global economic and trade negotiations.

However, will such threatening posturing from the US really scare a big country like China or cripple the global multilateral trading system? From the perspective of general market participants, it is obvious that previous US threats have had no actual impact on China's exports and industrial production, which have quite a lot of comparative advantages. The US financial market has already reacted strongly. Global foreign exchange and commodities markets have also seen turmoil. The US and China are the only two economies in the world that reach tens of trillions of dollars. But the US financial industry is more developed, and the US national economy is much more dependent on the financial sector, so financial market turmoil will have a much bigger impact on the US than on China.

The US will have its presidential election next year. Trump's desire for re-election far exceeds that of other US presidents. Strong economic performance will be his biggest trump card to win the election. However, the US economy has just passed a record of 120 consecutive months of expansion at the end of June, indicating that recession and financial crisis are approaching. If a depression or crisis breaks out when Trump is engaged in the intense presidential campaign, his re-election hopes will probably be dashed. Trump has been pushing hard and urging the Fed to cut interest rates substantially at a time when the current US economic indicators still seem quite good, all because of his lack of confidence in the US economic prospects in the coming years. Under such circumstances, continuously interfering in the market will only lead to more trouble for the US economy. 

Moreover, the US needs to learn the essence of the saying that history makes men wise. Success only comes through hard work. China today has become the leading manufacturing country, the largest exporter and the second-largest economy. The country's equipment manufacturing output accounted for one-third of the global total in 2013, more than twice as much as Germany which was in second place. Therefore, the US has listed China as a major strategic competitor. China has developed into an industrialized giant from a poor agricultural country in just 70 years. The country has pulled through numerous hardships and danger, but China prevailed over every difficulty. The so-called "China miracle" has enabled the country to keep advancing.

The expectations for the Chinese market worsened in the second half of 2018, but it was nowhere close to the pessimism that was spreading domestically and internationally during major exogenous shocks in history. The "conclusions" such as the "China collapse" theory, or the "technical bankruptcy of the entire Chinese banking system" have been around for years. In the 1980s and the beginning of the 1990s, many forces were anticipating China's downfall. But the Chinese economy caught up and surprised many people. Since the 1990s, a trade surplus has become normal and has laid the foundations for the high-speed growth seen in the last 20 years.

Reflecting on history makes men wise. Since 2018, China has been hit by another major external shock, in the form of the trade war launched by the US. The clamor among some US politicians and the irrational suppression of Chinese high-tech firms including Huawei and ZTE smack of ominous signs of a new Cold War. But do those expecting to pressure China to give up its principles and stance by means of extreme pressure understand how China overcame multiple obstacles, especially in the late 1980s and early 1990s?

The repeated practice of extreme pressure by the US has gone as far as threatening to impose additional tariffs on all the remaining Chinese products. This certainly makes market participants believe that the US government is running out of gas. Additionally, as US mainstream media outlets have reported, even some publicly recognized hardliners were against the new tariff threat. On top of that, compared with the periods of time when China had been going through major external shockwaves, China's gap with the US in terms of comprehensive national power has narrowed considerably and China has moved ahead of the US in more fields. What's more, internal political conflicts in the US have grown to a level not seen in the last few decades. 

The 2018 midterm election results appear to have intensified US political conflicts. It is estimated that the US is at a greater risk of economic recession and financial crisis in the future while China will move to strengthen its consolidated, collective leadership, thereby being capable of coping with challenges in a more efficient way. Also, a sea change in the US population composition points to subversive risks lurking beneath the surface. An understanding of all of these things and reflections on history will help to make more precise judgments and wiser decisions. 

The author is a research fellow with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce. bizopinion@globaltimes.com.cn