As trade wars go, there has never been one with as much global impact as the economic battle between the United States and China. The worlds biggest importer versus the world’ biggest exporter is an intriguing scenario that seems evenly matched to the layman, but America and President Trump have had the upper hand from the beginning. It’s simply easier to find sellers than buyers.
China knows this. Their economy is slowing at a risky rate; they’re not in real danger yet but a prolonged war at the current tariff levels would eventually turn catastrophic. But tariffs aren’t staying at their current levels as President Trump continues to raise them and China continues to counter. At least they were countering until recently. Last week, they showed the first signs that they may be ready to back down. Today, they’ve officially confirmed it.
China indicated that it wouldn’t immediately retaliate against the latest U.S. tariff increase announced by President Donald Trump last week, emphasizing the need to discuss ways to deescalate the trade war between the world’s two largest economies.
“China has ample means for retaliation, but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation of the trade war,” Ministry of Commerce spokesman Gao Feng told reporters in Beijing on Thursday. “China is lodging solemn representations with the U.S. on the matter.”
When asked if that meant China wouldn’t retaliate at all for the latest escalation by the U.S., Gao didn’t elaborate but repeated the same comments. China has hit back against each previous tariff increase by the U.S., so not responding in kind this time may signal a change in strategy.
Let’s be clear about two things.
- Tariffs should be only used in worst-case scenarios. I’ve opposed them my whole life.
- China is a worst-case scenario. They steal intellectual property and technological secrets. They’re products are certainly cheap, which is why we import so many of them, but they’re also cheap, as in poor quality. This adds more evidence to my colleagues assertion that we really don’t need China.
This trade war must continue to escalate until China is ready to give in. That seems like a very aggressive stance for a free trader who generally opposes tariffs, but as another colleague noted, we can’t go in with half-measures. If there must be a trade war, let’s get in and get it done so we can get to the business of advancing free trade.
China is usually unpredictable, but there are situations like the trade war in which being predictable is a benefit for both sides. They need to maintain confidence among their people, and constantly increasing tariffs isn’t the way to do it. Whether they’re bluffing, stalling, or genuinely feel like it behooves them the take a loss in this case, we’ll only know after the fact. But given the nature of their economy, the case is clear that they need to end the financial conflict faster than the United States.
Trade negotiators are possibly on their way early next month. This deescalation by China seems to be more about self-preservation.
The writing is on the wall. The United States can survive and even flourish through a trade war. That’s not the case for export-heavy China. Their apparent shift seems to be preparation for saving face among their people.
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