What might a trade war between America and China look like? Press review by Pauline Goncalo

THE ARTICLE

Recently, in the US the new president Donald Trump manages to get himself talked about up to Asia and more precisely in China.

The Economist, an economist British newspaper, wrote the February 5th 2017, an article to explain what might a trade war between America and China look like?

Relationship between China and the US

Long and complicated relations

The US relationship with China is long, rich and complex. In the past, their traditions of freedom and their interests led US to support and cooperate with China.

Today, the US should be prepared to work with China when their interests coincide, but US also criticizes China when it violates their principles and oppose China when their interest conflicts, and vice versa. Americans have been interested in China for a long time and at first this interest was economic.

Americans were looking for new markets to buy goods, as British didn’t want and Chinese preferred to work with Americans, who bought their products, they worked rapidly together.

By the middle of the 19th century the relationship had grown. In the late 1800s, US leaders believed it would be better for American interests if China remained independent and united. So the US supported an “Open door” policy, which meant that China would have an “open door” to foreign investment and trade, but no nation would control it. But the ideological differences create tensions. In 1963, the US went to war in Vietnam in part to prevent the expansion of Chinese communism. It’s only in 1972, that the president Richard Nixon reestablished relations with the PRC. Nixon hoped to use better relations with China to balance the rising power of the Soviet Union.

Today, the United States and China are the two greatest powers: they have the largest economies and their trading relationship shapes the global economy. But at the same time, they have different and often opposing views on many national security and foreign policy issues.

WHAT MIGHT A TRADE WAR BETWEEN AMERICA AND CHINA LOOK LIKE?

China accusations of Donald Trump

Even though Chinese and American relationship was still more or less good, since Donald Trump the new American president, China became the pet peeve of the US. In fact, as said in the article Trump accuses China

“to stealing America’s intellectual property and taking American jobs.”

He blames Beijing of “taking advantage” of US economy and manipulating its currency that has permitted more advantages for Chinese exporters to dominate the American consumer goods markets.

He goes so far as to say that China invented the concept of global warming to make American manufacturing uncompetitive. This trade competition between the both might become a nightmare.

How Donald Trump could beat China on trade?

Of this side, Donald Trump threat to introduce tariffs to raise the price of Chinese goods in the US market by up to 45 percent. Tensions are high and the fears of economists are the counterattack of China and the impact on global economy.

There are two ways in which Donald Trump could beat China on trade:

“He might try to simply to enforce the rules of global trade in the court rooms of the World Trade Organization (WTO). In fact, trade rules are defined by WTO.
“He might accuse China of boosting its economy with subsidies and flooding some American market with cheap imports.

The economist explains that Obama policy had already accused China about that, but Trump’s underlings await more of the new President. The WTO rules are designed to handles the revenges of the both countries. That means, if the system works there will be limits on China and US revenges.

THE WORST-CASE SCENARIO

But everything couldn’t take place like that. The worst-case scenario for trade war between China and America would be if M. Trump decides to “bypass WTO rules or ditch them altogether after a decision does not go his way” says the article.

International organization dealing with the global rules of trade between nation. Main functions: ensure the trade flows as smoothly, predictably.

Who will be the winners and losers of the 45% tariffs on Chinese exports?

The economist explains that M. Trump decided to put 45% tariffs on Chinese exports such as on electronics or clothes made in China, there will be potential winners and losers.

Potential losers:

Raising prices of Chinese goods might undermine the purchasing power of the American middle class, the major consumer of Chinese goods: American shoppers “will feel the pinch”. Some American companies, which work with China, would suffer too.

China would be the first casualty. In fact, the U.S. is China's biggest export market, accounting for 18 percent of total exports, and China's overall exports would be expected to shrink at least 9 percent if Trump carried through with his tariff threat.

There would also be significant suffering due to the collapse of businesses and job losses, in fact, it’s estimated that China's exports had created 120 million jobs, including 20 million making products for the US market. As a result, Chinese exporters may not only lose the U.S. market but also the wider market in advanced countries because this war between Washington and Beijing could encourage other countries to become hostile to Chinese products.

First and foremost Donald Trump decision “would clearly violate WTO rules”. Americans will have to expect a revenge of China. In fact, Beijing might retaliate against the imports of U.S. goods, appeal to the World Trade Organization, and accuse the United States of violating WTO rules and regulations.

Numerous respected experts agree that a trade war between the world’s two largest economies is fraught with serious consequences for international trade worldwide.

Potential winners:

The winners of this potential trade was would be the American government, which see more tax revenue and also some American companies which will have less foreign competitors.

http://www.voanews.com/a/trump-trade-policy-loser-economists-contend/3323997.html

A backwards step

The article highlights that if a trade war between China and US will burst, it would be a backsliding. Indeed, the General Agreement on Tariffs and Trade (today WTO) has been creating “to avoid a race toward higher tariffs” because they had noted that alone, the countries economies were weaker.

Moral

Countries are stronger when they don’t erect trade barriers but work together.

- Written by Pauline Goncalo - February 8th, 2017 -

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