Beijing (AFP) – Trade friction between the United States and China is heating up as the world’s two biggest economies unveil rival tariff hit lists on goods together worth $100 billion.
Each side is gearing up to unleash duties of 25 percent, with Beijing targeting soybeans, cars, planes and whiskey. Washington eyes electronics, aircraft parts, satellites and medicine — among a slew of other products.
“Any attempt to bring China to its knees through threats and intimidation will never succeed. It will not succeed this time either,” China’s foreign ministry spokesman said.
What damage could the escalating trade row do?
What’s at stake?
The $100 billion worth of targeted goods represents a good portion of the $580 billion in two-way trade last year.
Two decades ago China’s economy was largely fuelled by exports, but it has rebalanced towards domestic investment and consumption since the global financial crisis erupted last decade — limiting the damage the trade tariffs could do to Beijing.
Exports to the US made up 18.9 percent of all exports last year, according to China’s customs data. US demand drove 2.5 percent of China’s GDP, research firm Capital Economics estimated.
What US exports is China targeting and why?
China imported $154 billion of US goods last year. The $50 billion of targets include top imports like soybeans and other agricultural products, as well as chemicals, whiskey, cars, and small aircraft.
By taking a shot at soybeans, China could hit farmers in rural states that supported US President Donald Trump.
“We know that many Trump supporters are from agricultural states like Illinois and Iowa, with most supporters tied to traditional agriculture,” said Zhang Monan, a researcher at the influential think-tank China Center for International Economic Exchanges.
“If China takes revenge on agriculture in the US, I think many Trump supporters may drop their support for him,” Zhang said.
Is a trade war winnable?
“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump tweeted last month.
But Chinese policymakers have taken to repeating one line: “No one wins a trade war.”
Economists agree. The US’s Smoot-Hawley Act of 1930 increased tariffs on nearly 1,000 imports and exacerbated the turmoil of the Great Depression by pummelling world trade.
Are the sides still negotiating?
Some analysts believe the Trump administration is using the threat of tariffs — neither side has yet fixed an implementation date — to pressure China to open up its markets.
Both sides are applying pressure at the moment, Zhang said: “The Americans will definitely take the lead on outlining their demands, their new demands for China. China wants equal negotiations.”
Officials in Beijing have said they are open to negotiations but were forced to punch back.
Last month US Treasury Secretary Steven Mnuchin said a trade war was not the objective and the countries were continuing to discuss trade issues.
Will China pay attention to intellectual property?
The US tariffs were unveiled alongside a US Trade Representative investigative report into intellectual property theft in China.
It outlines a number of areas where China falls short in protecting IP, including forcing US companies in China to transfer technology in return for market access. Beijing maintains it is already stepping up efforts to protect IP in China.
“China is building an innovative society, the work of intellectual property protection is of utmost importance,” said Zhu Guangyao, China’s vice finance minister, in a press conference discussing the new tariffs.