The trade negotiation between the U.S. and China is not simply an ordinary economic dispute between two competing countries, it is a power struggle between the world’s dueling superpowers. China is the first legitimate economic and military rival the U.S. has faced since the Soviet Union began it’s demise 30 years ago. As we approach a potential deal, many are discussing whether the U.S. has ‘won’ or ‘lost’ and whether the temporary tariffs were successful, but the results may not be known for decades. What can we practically access about the deal? In the first of our original series covering trade with China, we take a look at the impact of tariffs on China, the effects on other trading partners, and discuss whether broad tariffs are the most effective means of ensuring U.S. influence in the world.
If Not Now, When?
Bryan Cosby – Fourth View Contributor
China’s meteoric economic rise and military buildup have quickly become a challenge to U.S. hegemony. From claims to the South China Sea to its Belt-and-Road Initiative, China has sought to buy allegiance through massive offerings and force influence through related debt traps.
China has grown increasingly aggressive in its military deployments and influence campaigns across the globe: from claims to the South China Sea to its Belt-and-Road Initiative. This initiative has enacted infrastructure projects in Pakistan, Sri Lanka, and Djibouti with substantial military strings attached. And their military is only getting stronger – China now spends as much as the rest of Asia combined, having increased investment more than twenty-fold since 1989. If China does become the world’s largest economy, it could spend a comparable or an even greater amount on its military than the U.S.
Trade between the U.S. and China has been beneficial to both countries for decades, but the time has come to decide if continuing to enrich an increasingly adversarial country is worth the long-term geopolitical risks.
Tariffs Harm Allies More Than China
Marika Heller – Albright Stonebridge Group
If the objective of the tariffs is to impose exacting costs on an economic and geopolitical rival of the United States, many tariffs that have been wrapped into the broader trade war actually harm and alienate the very allies the United States will need to cooperate with it to deal with the growing challenge of China. While the tariffs have created economic opportunities for some countries like Brazil, Argentina, Australia, and others that are filling the void left by the U.S. in China’s imports, U.S. Section 232 tariffs on steel and aluminum are damaging allies more than they are China. The U.S. Department of Commerce has excluded 40% of imports of Chinese steel from the 25% tariff levied under the Section 232 investigation, but by contrast has only excluded 2% of total Canadian steel imports from the same tariff. Japan and Germany are essential partners in any actions for countering growing Chinese geopolitical and military influence, but they are also expected to be severely impacted by the new Section 232 auto import tariffs that will impose 25% tariffs on all car imports, while China has virtually no auto exports to the United States and so will remain unaffected.
A Wall Street Perspective
Michael Li – Buy-Side Investment Analyst
In this game of chicken, both sides are trying to make their threats credible and the risk of miscalculation and miscommunication increases sharply. So there could be one or two rounds of tit-for-tat before reaching an agreement. Reduced cooperation on trade over the next few years could hurt cross-border investment flows and place the US in a lagging rather than a leading position in future economic and political partnerships. I personally see the trade tension between US and China as justified and potentially a push that is badly needed for China’s government to address these structural challenges in a timely manner, which are critical for unlocking the full potential of China’s productivity growth.