First published in August 2017, Updated September 29, 2018
While President Trump has announced a trade war directed against China, he also ordered hikes in tariffs directed against Canada, Mexico, the European Union and South Korea not to mention the economic sanctions regime imposed on Russia, Iran, North Korea, Cuba and Venezuela. This broader trade war directed against the EU and America’s NAFTA partners has far-reaching implications. Similarly, President Trump fails to understand that these trade restrictions –including those directed against China– are largely detrimental to the U.S. economy.
With regard to China, Trump has duly instructed his administration to impose tariffs on about $50 billion worth of Chinese imports.
His stated objective is to reduce the trade deficit with China.
What Trump does not realize is that the trade deficit with China contributes to sustaining America’s retail economy, it also contributes to the growth of America’s GDP.
Trade sanctions directed against China would immediately backlash against America.
In recent developments (September 28, 2018), China’s foreign Minister Wang Yi warned Washington that the PRC “will not be blackmailed”:
“Protectionism will only hurt oneself, and unilateral moves will bring damage to all,” he said in a statement at the UN general assembly gathering of world leaders.
“President Donald Trump this week cranked up punitive tariffs on China, and Beijing responded in kind, escalating a trade war between the world’s two largest economies.
Trump upped the ante by then accusing China of meddling in the upcoming US midterm elections because it opposes his trade policies.” (The Guardian, September 28, 2018)
What US foreign policymakers do not understand is that China is not dependent on US imports. Quite the opposite. America is an import led economy with a weak industrial and manufacturing base, heavily dependent on imports from China.
Imagine what would happen if China following Washington’s threats decided from one day to the next to significantly curtail its “Made in China” commodity exports to the USA.
It would be absolutely devastating, disrupting the consumer economy, an economic and financial chaos.
“Made in China” is the backbone of retail trade in the USA which indelibly sustains household consumption in virtually all major commodity categories from clothing,