US And China Brace For Trade War That Could Rattle Global Economy
US And China Brace For Trade War That Could Rattle Global Economy
As we reported last week, the US non-petroleum trade deficit with China and Mexico – two of its largest trading partners – climbed to its highest level for a 12-month period in December, an embarrassing development for the Trump administration, which has repeatedly promised to protect US industry by raising trade barriers.
However, the rising deficit, bolstered by a weakening US dollar, could ratchet up the political urgency of the Trump administration’s trade agenda. And as the Wall Street Journal points out, the White House is preparing a mix of tariffs and quotas to confront the growing economic threat from China. Though this confrontation could be potentially disruptive for the global system of free trade, even potentially leading to the collapse of the World Trade Organization, a group the Trump administration believes China should never have been allowed to join.
In his column, the WSJ’s Andrew Browne points out that the last time the US became embroiled in a trade war, Ronald Reagan was president. And its adversary was a close US ally: Japan.
At the time, Japan’s economy was much smaller than the US economy. Today, the Chinese economy has by some measures eclipsed the US. Such an unprecedented trade showdown between the US and China could have far reaching ramifications.
A trade war isn’t a certainty, but if it comes, it will look nothing like the battles that raged in the 1980s over Japanese semiconductors, cars and TV sets.
The forces are more evenly matched this time: America has never faced off in a trade skirmish with an opponent like China in terms of economic size, industrial capabilities and global ambitions.
Japan was a U.S. ally, China increasingly a rival. That raises the risk of tit-for-tat escalation, especially since support for Beijing is crumbling across the U.S. political spectrum as well as in the U.S. business community, traditionally a strong advocate for China trade.
Anti-trade rhetoric has been embraced by both sides, with President Donald Trump’s “America First” proclamations and President Xi Jinping’s “Chinese Dream” scenario.
In this brewing battle fueled by protectionists in both camps (Mr. Trump’s “America First“ finds its nationalist counterpoint in President Xi Jinping’s “China Dream”), each side has an exaggerated sense of its own advantages.
“A trade war is coming because of ideological zealotry and absolutely contradictory estimates of who has more leverage,” says Scott Kennedy, an expert on Chinese industrial policy at the Center for Strategic and International Studies, a Washington-based think tank.
Global markets are wildly unprepared for a full-blown China-US trade war, WSJ reports. Earlier this month, the Eurasia Group highlighted “protectionism” as one of the biggest geopolitical risks of 2018. One of the reasons, Eurasia Group argues, is because industrialized economies are embracing a wider tool chest of pro-trade measures, including indirect subsidies and bailouts.
Governments aren’t just trying to protect comparative advantages in traditional sectors such as agriculture, metals, chemicals, and machinery out of concern for lost jobs or domestic economic interests. They’re also intervening in the digital economy and innovation-intensive industries as protecting intellectual property becomes an increasingly important priority.
But instead of traditional measures such as import tariffs and quotas, today’s tools of choice include “behind-the-border” measures such as bailouts, subsidies, and “buy local” requirements designed to bolster domestic companies and industries. These measures don’t necessarily circumvent WTO commitments; they rely on a collective inability to update and strengthen existing global trade rules…….more here
Click here for reuse options!
Copyright 2018 Hiram's 1555 Blog
Like this:
Like Loading...
Related
