China Center for International Economic Exchanges

Wei Jianguo: The US is Preparing for a Trade War
Date:Mar 14,2018    Source:CCIEE

The steep tariff imposed by the United States recently on imported steel and aluminum products has been opposed by the international community. Many countries expressed their concern and criticism, and some of them are planning to take countermeasures.

Some analysts believe that the tariff is a trick used by Trump to frighten its opponents. However, I do not agree with this view and I think that the United States is determined to start a trade war.

The United States is changing from being a supporter of free trade and globalization to an advocate of reciprocal trade. The trade protectionists in the US believe that the United States did not get fair treatment in the so-called fair trade, but many “free-riding” countries have benefited from trading with the US, the US even handed over the power of making trade rules to China. Trump put forward the so-called reciprocal trade, which actually only puts America’s interest first. The US expects all other countries to follow whatever it does, regardless their size and trade deficit with the US. Trump claims that the trade war is a good thing and the US can win the war easily. The trade war can help Trump win the mid-term election, fulfill the promise he made during his previous election campaign and to succeed in the re-election.

The tariff increase on imported steel and aluminum products can be seen as a measure of testing the reaction of all relevant parties. Canada and Mexico are excepted from this tariff because they are preparing to renegotiate the North American Free Trade Agreement with the US. For the EU, the United States will urge it to accept its terms in relation to cars and investments. Moreover, the US will require Japan to offer more favorable conditions if it wants the US to return to the TPP. No matter what, the core principle is that the initiative must be in the hands of the United States.

The tariff imposed by Trump on imported steel and aluminum products have received a strong reaction from all countries, showing that Trump’s test has certainly served its purpose. It is expected that he will take more serious actions in the next step and some of them will have a significant consequence, such as the increased tax on intellectual property protection, the clause 201, and US-China BIT negotiations and economic and trade dialogues.

Some people suggest that the biggest opponents of the trade war come from the incumbent administration, which is so na?ve. Within the Trump administration, important figures such as the Secretary of Commerce, the representative of trade negotiation and the chairman of the national trade commission, are trying to make the US great again by promoting the principle of America First.

Some people think that this “fire test” is not mainly against China because China does not export lot of steel to the United States. What if the United States launch more serious action in the next step? Should China unite with other victims of the WTO? When assessing the overall situation of trade, we should ask the following questions: is the trade good for the recovery of the global economy? Will it promote globalization and meet the global interests? If it is not conducive to global economic recovery and even drags the world into the crisis like the US-European trade war in the 1970s, China must join other countries to fight against the trade protection.

We must be well-prepared for the next move of the United States because it will be hard to control it once the US-China trade war breaks out. The best choice for China is to reduce misjudgments and resolve problems through high-level communication between the two countries. In particular, we should explain to the United States that trade war is not the right way to solve problems. We should resolve problems appropriately, including jointly exploring the third markets and cooperate in new areas of trade.

 

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