The U.S. stock market is gyrating this week amid growing trade tensions between Washington and Beijing. But the fight between the world’s two largest economies goes beyond who wins in the market. China has rebuffed a call for a ceasefire in an escalating trade war with the United States. Here are five things to know about the impasse:
Tariffs will happen and rise – Even though the White House is pushing Chinese trade officials to take reciprocal steps to ease tensions. The situation seems to keep getting worse for Beijing, with tariffs set to be imposed on U.S. farm goods and other products, and efforts in Congress to pass targeted bills for retaliation against imports.
China is unwilling to respond – Coinciding with the White House challenge to China on trade, Beijing said its economy faced “mounting economic and financial risks” and that it “strongly opposes” measures that will harm its interests. It’s possible that the US is already facing retaliation. One possible example would be the European Union, which has a pending request in the World Trade Organization (WTO) that the U.S. notify it before imposing tariffs. The US could lose its WTO membership if it tries to launch a trade war, but if that doesn’t work, losing WTO membership is a means of targeting American products.
The US has a competing interest in the case – The White House says its primary interest is to create American jobs. The debate over whether to impose tariffs goes beyond jobs. It’s about principles – China has targeted key American exports, including soybeans, an important U.S. commodity for its agricultural sector. China also has clashed with the U.S. over its industrial subsidies and intellectual property protections. The US trade representative has also said it’s considering targeting areas that benefit from Chinese investment.
China is probably right to seek help – The decision on tariffs is expected by mid-May. Trump could make a decision then, but the timetable is loose, given other priorities, such as Afghanistan, North Korea and potentially Iran. If China doesn’t get its way, it could take more steps of retaliation against US products, including starting an investigation of new U.S. investments in China. Trump also can argue that he’s stepped up tariffs on Chinese products to protect U.S. workers and other sectors that are being hit with Chinese tariffs on American steel, aluminum and other goods. If China decides to retaliate or goes it alone, Trump can point to the US action to support his argument of being tough on the trade deficit with China.
This article appeared in the Guardian on 24 April 2018