How Trump threatens China and why Americans will pay for it again

07.05.2019

The world economic community has been waiting for this week to fully end the US-Chinese trade war. These expectations were the stronger, the more serious the consequences of this confrontation. It has long been clear to business and financial circles that it cannot continue like this - the exchange of duties between Washington and Beijing slows down the world economy and badly affects the national economies of these countries.

In recent months, Trump has reported that the case is moving towards a “good” deal with China, that Beijing is ready to make concessions (and he went to them), and that concluding a final agreement is only a matter of time. The Celestial Empire secretly agreed to remove the requirement for American companies to share know-how in exchange for permission to work in the Chinese market. At least Trump has repeatedly stated that such a requirement exists and representatives of American business complain about it.

On the other hand, China’s unexpected flexibility is explained by the threat of the introduction of new trade duties against it - by $ 200 billion. Previously, the parties agreed on a truce in a trade war, and so far Trump “as it were” postponed the introduction of these measures. And now, just a few days before the crucial stage of the negotiations, Trump's Twitter has once again become “vicious” and many threats have come down from it. And such in scale that economists on both sides of the ocean were surprised by this.

A double salvo from Trump across China followed on Twitter on Sunday. On the eve of the talks, they were waiting for the next sayings in the style of “everything is going well” and “there will be a great deal ahead.” However, this did not happen. The US president accused Chinese sales representatives of trying to renegotiate the terms of a potential agreement, for which Beijing will certainly be punished. Trump here seems to have forgotten that this is actually about negotiations, and not just about the humiliating ceremony of signing a profitable US deal for China.

For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars....

tweeted Trump

The second tweet continued the first. In it, Trump warned about the prospects for the introduction of new 25 percent duties already at $ 325 billion, and for goods that were not previously subject to such duties. The reason is “the deal continues, but too slowly, as they are trying to revise the conditions.” These statements by Trump are now being actively discussed both in the US and in China. Moreover, the scale of these discussions is such that no negotiations can ever happen.

Trump's tweets surprised many Chinese officials. China is now considering the possibility of canceling trade talks, which should resume in Washington starting Wednesday.

So far, no official in China or the United States has confirmed Trump’s maxim that Beijing allegedly shirks some already agreed conditions. However, even if we assume that this is so, the threats from the US president really humiliate China and put it in a dependent position at the talks.

Having cocked the trigger of this “pistol”, Trump caused the Chinese side to refuse to talk on blackmail terms. US business circles rightly point out that China warned against the inadmissibility of such rhetoric and "will fulfill its promise if it avoids negotiations under threat." But then why this behavior to Trump himself?

First of all, Western economists point out that rates for China have increased. And this is one of the reasons why Trump decided on threats before the negotiations. Business agency Bloomberg notes that China's sales representative Liu He should arrive in Washington on Wednesday, along with a delegation of about 100 people. Now, Mr. He is faced with a choice - either not to go to the United States at all, or not only to accept the existing Trump demands, but also, probably, to make new concessions.

One of the most popular opinions is that Trump is deliberately swinging the markets so as not to let go of the levers of influence on them. After two high-profile tweets of the US President on Sunday on Monday, the Chinese market collapsed by 7-8% at once. As usual, the echo rolled through to other emerging markets: the Russian RTS index fell by 1.5% at the opening of trading. In parallel, Brent crude fell by 0.51%. In short, the effect of tweets was quite large-scale.

The position of Trump is stronger, the higher the rates, economists say. If there is something to back up the threats, then the situation may ultimately turn into not just a US victory in the trade war with China, but a full-scale triumph with many concessions and restrictions.

Thus, at Trump at least three goals - economic, associated with the game on the collapse of the Chinese market, political - to earn points in political circles, as well as image, designed to conquer the electorate.

But there are problems

The trade war does not come to Trump as easily as he would like. Or how much does he imagine this, speaking of "impressive economic results" on Sunday tweet. Tsargrad previously wrote that the economic confrontation with China has put many branches of the American economy at risk. The fact is that a large number of American companies are using China as a production base. Industrialization is traditionally well developed in the Middle Kingdom; there is the necessary capacity for production, cheap labor.

In addition, for 10 months of 2018, despite the trade war, the trade turnover of China and the United States grew by 12% and reached $ 526.1 billion. During this period, China only increased exports by 12.3% to $ 392.1 billion, and imports from the United States - only by 8.5%, to $ 134 billion. Thus, the negative trade balance of the United States and China reached $ 258.1 billion. This is Washington's net loss from trade with Beijing.

 

However, Trump managed to throw a noose around his neck for his personal image trade war with China, as well as American farmers, who for the time being suffer reciprocal duties from China, but may soon take the White House by storm, demanding to make a deal with Beijing. Farmers ’affairs are very bad, as Western economists have already said. Soybean producers, for example, suffered the most, for example, exports to China had previously reached 60% of all American exports to this country, and now they have almost stopped.

The impact of the trade war back and ordinary Americans, the middle class of society. According to the Wall Street Journal, Trump's intention to hit China with new duties has already caused a flurry of criticism from US trade groups, as this is a potential increase in the value of imports for Americans.

An assessment by the American Clothing and Footwear Association is also given. According to her, if Trump enforces the “sentence” against China and increases the duties on clothes by up to 25%, then the spending of the average American family of four will increase by $ 500 a year.

It is in this way that Trump exposes entire sectors of the American economy, US citizens, large companies that benefit from the lowest possible duties on trade with China. This is done for the sake of political interests and a confident victory over Beijing, which Trump cannot wait to be included in an asset in order to trump it during the election campaign. The interests of the United States at the same time, it seems, is nothing.