China-US Tariff War: Who Blinks?

By Stephen Ubanna

For years ,  past and Present Presidents of the United States and the Premiers of the People’s Republic of China have been suspicious of their trade relationship. The US  Presidents, particular, Donald Trump  had never trusted China, believing that  it was pilfering its trade secrets  and distorting its market policies which was affecting the home economy.

These may ignited the trade war, forcing the North American country  to send  a signal to Xi Jinping , the  Chinese Premier, that  the American government has  increased tariffs on 200 billion  worth of China products   to 25 percent  . This is in addition  to ordering  the start of  a process  that could facilitate the imposition of  higher duties  on another 300 billion  of china manufactured goods  entering into the North  American  country economy.

Many believe that  the tariffs imposed on the  China  products , in theory”, would make  US goods to be cheaper than imported ones from China  and thus encouraging  importers  from Europe, Africa and other parts of the world to buy made in US products.

 The Trump Administration was said to have targeted eight  china products to be affected by the tariff increase. They are children’s bikes, animal medicine, Baby Cots,roof tiles,fridges, dehumidfiers and air conditioners, car tyres, hadbags and luggage. There indications that the Southern Shrimp Alliance, a Company based in the US, which had  welcomed the punitive tariffs on the China products are even appealing  to the US President  to further increase the tariff to make china goods unattractive in the country.

Xi Jinping: Premier of China

He may have bowed to pressure to further increase  the tariff on imported China goods  as he was said to have began the process of expanding  the  country’s tariffs  to cover  all $540 billion  imports from the Asian country, which people fear  would  raise   the prices  of everyday  products such as  cell phones, sunglasses, cameras and televisions.

The US President  may have been forced to take such a harsh economic measure against the Asian economic giant because of  the latest round  of trade negotiations  between  the two countries   on a number of American goods  which could not make a headway.  That much was contained in a Statement   issued by the   Tariff Policy Commission  of the State Council- China’s Cabinet.  

  Already China has made it clear to the US  government  that they would not  be forced  to  bow to external pressure  to toe the line of  their trade policies. That much was said by the spokes person of the   foreign  Affairs  ministry of China, which was said to be at the  at the instance of  the minister.

The Asian country may have told Trump , the US , President, that  they would not hesitate  to fight back by imposing higher tariffs on $60 billion  worth  of  the North American country  goods entering the Chinese economy from June 1, 2019. The Chinese government, according to  sources  hard targeted  to impose the  punitive tariff on products including  chemicals, Coal and   medical equipment, with Levies  and duties and levies that range from  5 percent to 25 percent

 It was said to have also targeted  products   with strong  support  for the Trump Republicans as well as  goods that can be  purchased elsewhere , particular  soyabeans. Officials of the  China ministry of Finance  may have summed up  the reason for the Chinese government action stressing that it was  targeted at breaking  ”US unilateralism and trade protectionism”.

 The US President may have known the  implication of  the Chinese government engaging  his country in a trade war that  he pleaded with the Asian country  not to retaliate    by initiating punitive   duties on   American imports into the country. He fears that if  the country should retaliate  in imposing higher tariffs on its  exports  into the country,  its economy will get worse. 

An aggrieve  Trump who is not happy that the two days  of talks  to resolve  the trade disputes between  the two countries  ended without reaching any reasonable agreement  has  made it clear to those that care to listen including the Chinese officials   that American  Companies  based in  China  will close down their factories  if a trade deal was  not reached quickly to address the  raging trade  problem between them. 

Trump may have made known his feelings in a recent tweet where he declared: I say  openly to  Jinping , the Chinese President and  my other friends from China   that the country  will hurt  very badly  if they don’t make a deal  with the US  because”  American Companies  operating in the Asian country would be  forced  to the leave  China to other countries ”.

The US government may have found a way out to deal with the  Chinese  government which  had entered into  Currency Swap deal  with many countries  including Nigeria to use the Chinese Yen instead of the US dollar  in financing trade transactions and investment between the two countries.

Many believe  that if the trade dispute between the two economic giants are not quickly resolve,  US, purpose of initiating the trade war may be achieved as   manufactured goods, particular Computers and mobile phones  would be too expensive to buy from China, by importers from countries, who  had entered into  Currency Swap deal with the Asian country.  Trump had mocked Jinping of China, ”  you had a great  deal which was almost sealed but  you backed out”.

He maintains that tariffed  Companies  will be leaving  China  in their hundreds to  for Vietenam  , Hunkong   and other Asian countries  to  open up new factories.  He is optimistic that there  will be  nobody left  in China  to do business  with by their  Asian, Europe and African countries Customers. That would be very bad news  for China and very good news for the US”, he had said.  

Despite Trump’s impression that the China economy would be worst hit in the trade dispute, described as  the largest  trade war  in economic history, both the US and other international  firms  are no longer finding it funny  in their operations  as  they have raised alarm that they are being ”harmed”.

Business analyst fears that  the  US citizenry would be the worst hit in the trade war  with war.  This is because  the impact  from the  punitive tariffs  and levies that would be paid on the imported manufacture goods   which are paid by the  American importers   would be passed  on  to the Consumers, an indication that the prices of goods and services would go up , which  may fuel inflation in the country  and subsequent crash of the dollar in the foreign exchange market.

The price hikes are already being contemplated upon  at target Cosco,   Home depot,  and Walmart, according Nelson Dong, a partner  with Dorsey and Whtney in Seatle, that may be passed on  to the consumer ‘ to recover their costs of importation.  Perhaps to cushion the effect of the tariff war on American citizens,  the US President has boasted  that  his government  is collecting  hundreds  of billions of dollars in revenue from import duties  as he plans  to use $15 billion  of the collected revenue  to bail out farmers suffering  from lost  sales to China. ”Our farmers will be very happy, our manufacturers will very happy”,  he had said.

Global market analysts on their part fear that the trade war between  super powers and  economic giants  , however, warn  that it would shatter global economic  growth, particular, the economies of  Organisation of Petroleum Exporting Countries, OPEC,  member countries,  as  it would hurt the demand  for oil by the  two major consuming nation.

Note that the World Trade Organisation , WTO, has warned  of  a ”global trade crisis ahead if the China-US  trade  war was not quickly settled by the parties before it spread to other countries that may trigger  another round of recession  in many weak economies, like Nigeria that may not be able to absolve the shock. Over   70 percent of the imported goods into the Nigerian market  are currently from China and India while about 12 percent are from the US.

It is not surprising  why the world are watching to see how the trade war between the two economic giants would end.

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