Beijing has rightfully rebuffed the United States’ protectionist forays into trade. They claim, succumbing to US pressure is just not tenable. In an editorial published by the China Daily on Wednesday night, the publication emphasized that “caving into the US pressure is out of the question for Beijing.” China promised to push back against what it sees as vicious US-imposed tariffs. This position, made even more powerful during the presidency of President Donald Trump, cements their hardline stance.
It’s hard to think of a more nationalist, or prouder, leader than Chinese President Xi Jinping. Our editorial today explains the ways in which his pride is preventing China from complying with US demands. Trump has previously indicated that he believes China is looking to negotiate but is unsure of how to proceed due to its national pride. They’re ready to reach an agreement, they just don’t know what it would look like. They’re proud people. President Xi [Jinping] is a proud man,” President Trump said.
In recent developments, Beijing’s attempts to strengthen ties with Australia were met with resistance from the country’s Defence Minister Richard Marles, who stated, “We’re not about to make common cause with China – that’s not what’s going to happen here.” Marles reiterated Australia’s willingness to diversify its own economic relationships…not becoming too dependent on China.
In the interim, global stock markets responded enthusiastically to news of a 90-day halt on the U.S. putting in place tougher, steeper tariffs. The Dow Jones Index jumped almost 8% on Wall Street. At the same time, the Nasdaq was partying with an amazing 12.2% rise, its largest single-day percentage gain in 24 years. Moreover, the ASX 200 surged over 6% in Australia, mirroring investor exuberance despite dreadful trade relations.
Japan’s Chief Government Spokesman, Yoshimasa Hayashi was quick to welcome the US announcement. He views it as a step in the right direction to help combat trade disputes. As those tariffs have grown, they’ve alarmed economic experts. Ngozi Okonjo-Iweala, head of the World Trade Organization, warned that an escalating tariff conflict between the US and China could “severely damage the global economic outlook.”
Trump called for even higher levies — 104% — on Chinese goods at first. He subsequently raised that number to 125%, only growing the apprehension over a long-standing trade war. The US government’s laser focus is on decoupling China from its consumer market. At the same time, it is reordering global supply chains to benefit American workers first and foremost. In response to these aggressive escalations, EU member states began to respond equally aggressively. They re-approved retaliatory tariffs of 25% on US goods up to $23 billion.
As the English-language China Daily wrote in an editorial following the implementation of these punitive tariffs, “the impact on China’s export-oriented industries will be catastrophic.” Export-oriented industries (agriculture, energy) will take a long-term hit to their profits. This double whammy of declining manufacturing investment and slumping consumer confidence will deepen the drag on our still-recovering economy. China is well aware of the harm caused by excessively high tariffs. It is convinced that acquiescing to US demands will not yield any benefits.
Beijing’s response to these developments includes its own set of tariffs aimed at counteracting Trump’s policies. For Chinese companies, that means bracing for steep tariff hikes on their goods sold on sites such as Amazon.com. This latest move increasingly calls into question their long-term viability in the US market.
Lin Jian, a Chinese trade expert, told Reuters that he doubted the US strategies would work. He claimed, “The US cause no longer wins the support of the people and is doomed to fail.”
Tensions between the two largest economies are both blaringly obvious and boiling over. Experts are already watching to see what this could mean for the future of global trade. The war deepens the humanitarian crisis on both sides and creates even bigger issues for other countries. It jeopardizes the security of their trade relationships for a large number of other countries.