Donald Trump’s personal tirade with China began well before the ongoing US-China trade war. During the 2016 presidential campaign, he did not hesitate in accusing China of being a ‘currency manipulator’, aggressively argued that countries like China have been stealing American jobs and constantly berated them for their diplomatic relations with North Korea, just to name a few.
Trump’s latest China tweet blames them for attempting to influence the US mid-term elections by attacking key American voters such as ‘farmers, ranchers and industrial workers because of their loyalty to [him]’, whilst threatening to slap on even more tariffs on Chinese goods. In some ways, this is true. China will now target goods like natural gas, especially in Republican states who are loyal to Trump, after the US put duties on $200bn of Chinese imports. Everything from aircraft, computers, chemicals, handbags, rice and textiles are being taxed by both economic superpowers. Where does this hostility towards China stem from? Is this tit-for-tat exchange benefiting anyone?
Even before Trump’s tirade, the US has been having issues with China: currency manipulation to increase exports, aggressively attempting to take over the South China Sea, mass copyright infringement on American intellectual property, the growing US trade deficit with China, just to name a few. The world’s sole superpower is starting to feel the threat posed by China’s emerging superpower status. China’s expected to become the largest economy in the world by 2032, overtaking the US. As well as this, their burgeoning relationship with African and Asian countries, the introduction of new economic corridors such as the Belt and Road Initiative with European states are slowly but significantly shifting the centre of world politics and economic activity from West to East, challenging America’s grip on world power. It’s therefore easy to see America’s need to keep China in its place before it’s in a proper position to challenge the world order.
The introduction of any tariff has always been a globally contentious issue. If domestic businesses feel threatened by their foreign competitor, they can ask the government to tax them. Whilst it protects domestic industries and creates jobs, it raises import prices for consumers, thus tariffs always lead to a trade-off between workers and consumers. It also leads to constant retaliation from other countries, leading to a ‘race to the bottom’ until someone gives up. The reception to the tariffs placed by Trump range from negative to mixed, with some US companies like Starkist supporting the government’s assessment of additional duties on Chinese tuna imports. Yet some companies like Westinghouse Electric, who produce nuclear fuel argue that because it relies on China for zirconium, key inputs for nuclear plants in Utah, Pennsylvania and South Carolina will cost more, increasing the cost of electricity for the US as a result. In fact, many US businesses have jointly warned that tariffs on $200 billion worth of Chinese imports will force everyday Americans to pay more for items they use all the time.
What has the effect of the trade war been on China? Many analysts predict that because China is heavily export-dependent, then they will get hit more by the tariffs than the US. So much so that China’s economic growth could be slowed next year by 0.6%. despite this, many Chinese are staying resolute in this matter, acknowledging that their business might be affected. One particular issue which can escalate is the fact that the US has a services surplus with China, meaning more services are sold to China, whereas China has a goods surplus. Any removal of key US services, particularly in finance and education will be especially detrimental to China. It does seem, therefore, that China has more to lose than the US economically in this trade war.
America may also lose somewhat economically, as the trade war increased uncertainty and thus reduce key Chinese investment in the US. Jack Ma, the founder of the Chinese e-commerce giant Alibaba, recently went back on his promise to create one million jobs in America, citing his worry of US-China relations further deteriorating.
It seems that this complex trade war between the two economic superpowers of the world will have significant negative consequences for many different groups of people, but it will hurt ordinary Americans and Chinese the most. Donald Trump’s heated rhetoric and his tone of certitude are especially unhelpful for future relations not just with China, but with the rest of the world. Whilst he claims that the trade war will benefit Americans, the evidence shows the complete opposite, with poorer Americans ultimately paying the price. China may have more to lose economically, but the ongoing trade war is going to be a major political failure on Trump’s part, impacting on his performance both in this year’s mid-term elections and the 2020 election.