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Elham AbolFateh

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US-China trade: lower the threat level

Saturday 07/April/2018 - 12:30 PM
Sada El Balad
The Guardian newspaper- Editorial:

Trade wars do not start by accident. If the US and China contrive to launch a new era of tit-for-tat protectionism to match that last seen in the 1930s it will be because of political decisions taken in Washington and Beijing by those with a full understanding of the consequences of their action. Comparisons with the drift to war in the summer of 1914 are wide of the mark.

Despite announcing plans for 25% tariffs on a small range of US imports this week، China has made clear that it wants to avoid a trade war. It will be happy to disarm if Donald Trump removes his threatened action against $50bn of Chinese goods. But Mr Trump is now threatening to escalate the battle with another $100bn of tariffs. The financial markets have been by turns spooked، then calmed، then alarmed again.

China has good reason to take a measured approach. It is an export-driven economy that had a trade surplus of close to $350bn with the US in 2016. Over the past four decades، people have moved from the countryside to find jobs in fast-growing cities. A full-blown trade war with the US could easily lead to factories closing and millions of unhappy unemployed workers. The leaders of China’s Communist party would prefer to avoid that.
It is perhaps more difficult to assess what Mr Trump wants to achieve. The president has made no secret of his desire to target what he considers to be China’s unfair trade practices، including currency manipulation and the need for US companies to cede intellectual property rights to Chinese partner firms in return for market access. Mr Trump is not alone in this analysis. Barack Obama said much the same when he was president، yet had little to show for a measured approach.

Mr Trump has little time for the traditional niceties of diplomacy. He prefers to adopt a strategy that is seemingly based on his own 1987 business bestseller، The Art of the Deal. This suggests that negotiators get nowhere unless they are prepared to be tough and make excessive demands that they will later modify. The early exchanges between Washington and Beijing seem consistent with that approach.

Yet trade talks with China are more complicated than clinching a real-estate deal in New York City in the 1980s. Mr Trump’s own background suggests that he too would prefer not to have a trade war. As far as it is possible to tell، the US administration is adopting the classic good cop، bad cop routine. One day Mr Trump tweets something minatory; the next his chief economic adviser Larry Kudlow steps out on to the White House lawn and says that in the fullness of time a deal will be done.

For now، the idea that what has happened so far is merely sabre-rattling looks a reasonable assumption. Wall Street thinks so، which is why share prices rallied when Mr Kudlow adopted an emollient tone. The US will have a quite lengthy consultation period before the threatened tariffs are implemented، which leaves plenty of time for a deal to be done.

Opinion polls suggest that Mr Trump’s tough line on trade is going down well with the voters. He may be further emboldened by the fact that China’s proposed tariffs cover 40% of its imports from the US، but account for less than 2% of total American exports and only 0.3% of US GDP. They would make barely a dent in a US economy that is growing at a healthy lick.

Yet a good negotiator knows when it is time to do the deal. Mr Trump may secure more trade concessions out of China than his predecessor ever did. The danger is that the man who claims “nobody knows more about trade than me” is not as good a negotiator as he thinks he is either.

Edited by Rasha Mohamed

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