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| Will a new tariff war serve U.S. interests? | |
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 Visitors test drive electric vehicle manufacturer BYD's pure electric truck at the Advanced Clean Transportation Expo 2022 in Long Beach, California, on May 10, 2022 (XINHUA)
U.S. President-elect Donald Trump announced via his social media platform that he intends to impose tariffs on a number of countries, including China, Mexico and Canada. During his election campaign, Trump stated that he would impose tariffs of 60 percent or more on imports of Chinese goods and suggested the possibility of imposing tariffs of 100 percent or higher on vehicles imported from Mexico. These remarks introduce additional uncertainties to the global economy. Will his tariff plans succeed? In an interview with China Focus, Wang Yiwei, a professor of international studies at Renmin University of China, provides his insights into Trump's potential trade policies and China-U.S. relations. Edited excerpts of the interview are as follows: What are the reasons behind Trump's proposed tariffs on China? Wang Yiwei: U.S. President-elect Trump likely intends to use tariffs as a strategic tool to exert pressure on international trade partners, particularly China, with the objective of disrupting China's role as the "world's factory" and diminishing its manufacturing dominance. Firstly, Trump employs tariffs as a negotiation strategy in dealings with China. This approach was evident during his first term and has resurfaced in his recent electoral campaign rhetoric. The threat of imposing tariffs stems from a perception among some U.S. policymakers that globalization has disproportionately favored China at the expense of the United States, contributing to the decline of American manufacturing and rising unemployment. Consequently, they advocate for stringent tariffs as a means to reclaim what they perceive as economic losses. Secondly, he seeks to gauge the responses of targeted trade partners to his tariff announcements. By doing so, he positions himself to potentially escalate tariffs or utilize other coercive strategies to elicit concessions from these partners. This is a negotiation tactic he frequently employs. However, Trump has revised the proposed tariff rate from an initial 60 percent during his campaign to a more recent 10 percent. This adjustment likely reflects concerns that a 60-percent tariff would be unsustainable for American businesses and consumers, particularly in the context of current high inflation. Trump's focus is on revitalizing the economy to fulfill his campaign promises. Thirdly, the tariffs aimed at China are intended to weaken its status as the global manufacturing hub. The trade conflict is designed to challenge China's manufacturing sector, compelling manufacturers to relocate their operations to the U.S. or other regions. Manufacturing is a cornerstone of China's economic competitiveness, intricately linked to employment, economic growth and social stability. The previous trade conflicts had a limited impact on China's economy due to the resilience and stability of its manufacturing sector. Therefore, these new tariffs are less likely to undermine China's position in global manufacturing. If the U.S. launches a new round of protectionist measures, how will it impact its economy and trade relations with China? The economic interdependence between China and the United States is substantial, and a trade war will inevitably impact various industries and businesses in both countries. In numerous sectors, the U.S. relies heavily on imports from China, including clothing, home appliances and materials such as rare earth elements. Currently, the U.S. lacks viable alternatives to replace China as a primary source of these imports. Imposing additional tariffs will increase costs, which will ultimately be borne by U.S. importers and consumers. Therefore, Chinese businesses should maintain confidence in managing potential higher tariffs. For enterprises that have developed symbiotic relationships within the supply chain, the use of tariffs is akin to a self-inflicted wound. American businesses could incur significant losses. Fortunately, business communities in both countries have anticipated this scenario and have prepared alternative or contingency strategies, which may mitigate the severity of the impact. Nevertheless, certain export-oriented Chinese enterprises, particularly those in coastal regions that primarily export to the U.S., will likely experience some challenges. Furthermore, certain high-tech industries in China are expected to be significantly affected. However, drawing from experiences during Trump's first term, these enterprises may have already been working on alternative strategies and diversifying their markets. The U.S. protectionist policies are not solely targeted at China but extend globally, and this approach is likely to have adverse effects on the U.S. economy itself. Is China's economy capable of withstanding the impact of a potential tariff war? To mitigate potential risks, China will implement appropriate measures, as outlined during the annual Central Economic Work Conference held at the end of 2024. These measures include boosting domestic demand, enhancing consumption capacity, and expanding Belt and Road cooperation. While external pressures are undoubtedly present, it is unlikely that Trump can intimidate China as he might expect. China is a major power with a vast market and a comprehensive industrial system. Over the past decades, China and the U.S. have developed mutually beneficial economic ties. Moreover, China is more resilient, stronger and more confident than it was eight years ago. The notion of using tariffs to coerce a nation—particularly one like China, a major player in global trade—has proven nearly impossible. In recent years, the U.S. has attempted to weaken China's leading role as the world's manufacturing powerhouse and disrupt its modernization process through various strategies, including trade wars, tech wars, decoupling and "derisking." All these efforts have ultimately failed. Regardless of the policies Trump might pursue in a second term, China should focus on strengthening internal governance. This includes maintaining its manufacturing advantage, upgrading industries, boosting domestic consumption and enhancing core competitiveness. BR The interview was first published on ChinaFocus.com Copyedited by G.P. Wilson Comments to dingying@cicgamericas.com |
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