Five questions on a US-China trade war

Updated 21 January 2017

Five questions on a US-China trade war

BEIJING: As US President Donald Trump takes the oath of office on Friday, Beijing is watching closely amid fears a trade war could break out between the world’s top two economies.
Trump has repeatedly blasted China’s trade policies and threatened to slap huge tariffs of up to 45 percent on its goods, while Chinese media have countered that imports of American aircraft, smart phones and agricultural products could suffer retaliation in any conflict.
What is at stake for the two countries and the global economy as a whole? And who stands to lose more?
The brash billionaire politician has long slammed US trade with China as lopsided and accused the country of manipulating its currency to gain an unfair advantage over US manufacturers.
While he is wrong that Beijing is keeping its currency low — the central bank now spends heavily to support the yuan and stem capital outflows — recent studies claim that the US lost 2 million jobs after China joined the World Trade Organization (WTO).
Trump claims he can bring some of those jobs back through tougher negotiations with Beijing, but China’s Ministry of Commerce warned Thursday that launching a trade war “will only make both countries suffer.”
On the face of it, China: It maintains a huge trade surplus with the US — roughly $30 billion per month in 2016, according to US Census data — and is in the midst of a tough economic transition that would become significantly tougher if exports plummeted.
To avoid that, Beijing is warning it could find ways to inflict maximum pain in event of a trade conflict, hinting through state media that it could retaliate against American companies that enjoy strong sales in China, such as Apple, GM and Boeing.
American soybean exports to China would also likely take a hit, impacting Trump’s rural constituency in America’s red states.
Nobody knows. But the message from China’s President Xi Jinping at Davos this week that “no one” will win in a trade war suggests an openness to compromise. And ahead of Trump’s inauguration the Ministry of Commerce said China is “willing to work” with his administration to “generate benefits for businesses and consumers on both sides.”
Trump’s secretary of commerce pick Wilbur Ross did not mention broad tariffs in his confirmation hearing, but suggested Washington could use existing rules to apply punitive measures against particular companies — a sign trade action could be less sweeping than feared.
Business leaders from both China and the US would also agitate strongly against any sharp deterioration in economic ties.
Last week’s meeting between billionaire entrepreneur Jack Ma and Trump saw the Alibaba founder pledging to create one million US jobs — a dubious promise, but music to the ears of the new administration.
Beijing has made some noise recently about further opening its market in a bid both to attract outside capital and to ward off criticism of an uneven playing field.
This week, China announced it would allow foreign companies to launch IPOs on its stock exchanges and last month it said some foreign firms could operate fully-owned subsidiaries, rather than joint ventures, in sectors including rail transportation equipment and motorcycles.
Still, non-Chinese companies continue to complain about access, with 80 percent of US companies saying foreign firms feel less welcome in a recent American Chamber of Commerce in China survey.
China ranked 84th globally — behind Saudi Arabia and Ukraine — in the World Bank’s ease of doing business index for 2016, and second to last in an OECD report on restrictiveness toward foreign investment.
China’s leadership will be closely watching Trump’s first moves in office. In a 100-day plan released before the election, Trump said that on his first day in office he would direct his secretary of the treasury to label China a currency manipulator.
But in a video released after Trump’s shock victory, the president-elect failed to mention the “day one” currency pledge.
He did, however, declare his intention to withdraw from the Trans-Pacific Partnership (TPP), an arduously negotiated Obama administration trade deal that Beijing detested as an effort to “contain” China.
That move, at least, could please the Communist Party leadership watching nervously in Zhongnanhai, its headquarters in Beijing.


US removes some Chinese furniture, modems from planned 10% tariffs

Updated 17 August 2019

US removes some Chinese furniture, modems from planned 10% tariffs

  • US President Donald Trump on Tuesday delayed more than half of the proposed tariffs until December
  • The $114 billion retail furniture industry has been among the sector’s hardest hit with price increases due to Trump’s tariffs

WASHINGTON: The Trump administration is sparing some Chinese-made household furniture, baby items and Internet modems and routers from its next rounds of 10 percent tariffs, it said on Friday.
The US Trade Representative’s office released a complete list of the items that were removed from $300 billion in tariffs scheduled to go into effect on Sept. 1 and Dec. 15, some of which had already been hit with 25 percent tariffs.
Trump on Tuesday delayed more than half of the proposed tariffs until December, saying it would help shield businesses and consumers from the US-China trade war fallout during the Christmas selling season.
The new list of 44 categories of spared imports, worth about $7.8 billion according to US Census Bureau data, also includes some chemical compounds used in the manufacture of plastics. Reuters previously reported that bibles and religious texts would be spared from the tariff list.
Modems and routers made in China were part of a $200 billion list of products hit with tariffs last September that have since been raised to 25 percent. Friday’s exclusion would avoid a further 10 percent hike as Trump imposes tariffs on Sept. 1 to products in the same broad customs category, including smart watches, smart speakers and Bluetooth headphones.
The bulk of the items removed from the tariff list were furniture products, including wooden- and metal-framed chairs and those made of plastics. Some of these were previously hit with tariffs as part of broader furniture categories.
Baby-related furniture items also were spared, including toddler beds, bassinets, cradles, strollers and children’s seats.
The $114 billion retail furniture industry has been among the sector’s hardest hit with price increases due to Trump’s tariffs, which rose to 25 percent in May.
The US Labor Department said on Tuesday that the price index for household furnishings rose 0.4 percent in July, marking its third consecutive monthly increase and contributing to broad-based growth in consumer prices during July.