Chinahasbeenforcedtotakecountermeasuresinresponse.OnAugust3,China鈥檚MinistryofCommerceannouncedplanstolevyadditionaltariffson$60billionworthofU.S.productsin5,207categorieswithfourtariffratesrangingfrom5to25percent.ThesetariffswillbecomeeffectiveintheeventthattheUnitedStatesfurtherattacksbilateraltradebyintroducingtariffsonmoreChineseproducts.
China鈥檚secondroundofcountermeasureshasnaturallygainedagreatdealofattentionaroundtheworld,butitisworthhighlightingthattheChineseside鈥檚latestmovehasdemonstratedthecountry鈥檚resolvetoconfronttradeaggression,withboththedecisionitselfanditsimplementationformingacoherentandlogicalresponse.Unityandstabilityindecisionandresponseareanimportantmeansofcopingwithallchallengesfacedbyanycountry.
Chinahassoughttominimizethedamagetoitsowneconomybytakingcountermeasures,whichisinherentinboththetimingoftheannouncementandthestaggeredtariffrates.
Asthisroundofthetradewarbegan,IsaidthatChinashouldpaycloseattentiontotheinfluenceoftradedisputesonitsfinancialmarkets.Thatisbecausehoweverfiercethewarofwordsbecomes,therelatedtradeingoodsandserviceswillremainunaffecteduntiltariffsactuallytakeeffect,whilethreatsthemselvesarepowerfulenoughtodisturbthefinancialmarkets.
Thetimingofmeasuresandcountermeasuresareimportantinthisregard.OnJuly10,theUnitedStatesannounced10-percenttariffson$200billionworthofChineseimports,butChinadidnotannouncecountermeasuresuntiltheeveningofAugust3,twodaysaftertheU.S.declarationofariseoftheadditionaldutiesto25percent.
ThatwasbecausetheChineseGovernmentunderstoodtheinevitableimpactofthetradewaronitsstockmarket,whichhadjustexperiencedatumultuousJuly.Ifcountermeasureshadbeenunveiledimmediately,theissuesaffectingtheChinesestockmarketwouldhaveworsened.Chinaannouncedthecountermeasuresat8p.m.onaFridayknowingthatthefollowingtwodayswerenottradingdays,allowingthedomesticstockmarketsometimetoprocessthenews.
WhiletheU.S.sidehasthreatenedtoincreasethetariffrateon$200billionworthofChineseimports,Chinaplanstolevyadditionaltariffson$60billionworthofU.S.productswithfourdifferentratesrangingfrom5to25percent.ActiontakenbytheUnitedStatesmayseemonthesurfacetobemoreaggressive,butitwilllikelyintensifyinflationintheUnitedStates.Onthecontrary,China鈥檚countermeasuresaimtominimizetheadverseimpactonChinesemanufacturersandconsumers.
Since2017,theUnitedStateshasbeenfacinghigherinflationarypressure.ConsumerPriceIndex(CPI)growthhasbeenabove2.1percentsince2017,withProducerPriceIndexgrowthevenhigher,indicatingthatCPIgrowthissettoacceleratefurther.Undersuchcircumstances,iftheUnitedStatesleviestariffsashighas25percenton$200-300billionworthofChineseproducts,mostofwhichcannotbereplacedbyimportsfromothercountries,theburdenwillinevitablybefeltbyU.S.consumers,ultimatelyintensifyinginflationinthecountry.
OnthecontraryChina鈥檚tariffsonU.S.productshavevaryingratesdependingonthesubstitutabilityoftheproductstheytarget,whichwillalleviatethenegativeimpactonChineseconsumers.
Neithersideissettogainfromatradewar.Weshouldnotexpectengagementtocomewithoutacost,butwemusttrytosignificantlyreducethepossibilityoftradewarsandotherformsoftradefrictionandtheirconsequencesinthefuturebybothmakingtheopponentfeelthepainandtryingtoseeksolutionstoeasetheadverseimpactonourselves.
Wemustfirstrelyonourowncapabilitiesandresourcesinsteadofexternalalliesinhandlingthistradewar.Onlywhenpotentialalliesinthefightagainsttradeprotectionismrealizeourcapacityanddeterminationtoaddressthistradewarcanapotentialunitedfrontbecomeareality.Inthemeantime,thisnowunavoidabletradewarisalsoprovidingnewpotentialopportunitiesforChina,andastimegoesby,theworldwillseeChina鈥檚successinexploringtheseopportunities.
CopyeditedbyLaurenceCoultonCommentsto