The waiting game is over; let the US-China trade war begin

The waiting game is over; let the US-China trade war begin

By Luke Vargas   
Courtesy: Ministry of Commerce, People's Republic of China

In the months since the U.S. first announced tariffs on China, neither country has made progress on resolving disagreements over market access or intellectual property

NEW YORK – The Trump administration has been announcing tariffs on China, but on Friday, a major round of tariffs on $34 billion in Chinese goods first announced this spring finally went into effect.

“This is where it hits the big time.”

Philip Levy is a senior fellow on the global economy at the Chicago Council on Global Affairs.

The first tariff announcements aimed to start a dialogue, as policymakers raced to avoid economic consequences.

That didn’t happen.

“I think there was some presumption that the president was engaged in a savvy negotiating maneuver in which case he would push the Chinese as hard as he could and then they would buckle at the last second. So you could put forward threats that would be painful to the U.S. if implemented, but we would never actually get there. Well, today we’ve gotten there.

U.S. negotiators did demand China open up sheltered domestic industries and stop stealing American intellectual property. China sent envoys to Washington in May and offered limited concessions. But a week later, Trump rejected their offer.

Spurned, China dug in its heels, and so did the U.S.

Monica de Bolle, a senior fellow at the Washington, D.C.-based Peterson Institute for International Economics, says that’s a bad sign of what’s to come:

“To the extent that both countries have this perception that one has leverage over the other, the only way this can go is into an escalation of a trade war.”

Levy agrees:

“Both countries have become very reliant on one another. That’s why a trade war will actually hurt both. It’s not simply a matter of the relative size of the two economies.”

For its part China hit the U.S. with retaliatory tariffs on Friday, but is also vowing “qualitative measures” to squeeze the U.S. economy.

“They could do things like denying regulatory approval to American businesses who work there,” Levy suggests.

De Bolle predicts China could delay U.S. imports at customs or dial up currency manipulation. One thing China is unlikely to do is blink:

“We have to remember China is a developing country. They have development goals. This is one of them. They’re not going to step away from that strategy.”

That means Friday’s tariff salvo could be the start of a very long war.

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