The Chinese Maneuver to Leverage the Trump Approach to Tariffs

By Robbin Laird

Meeting the Chinese global challenge and working a way ahead to roll back Chinese global activities to undercut the liberal democracies certainly requires a core US and allied effort.

But is the current approach being followed by the Trump Administration with regard to tariffs the best way to encourage a broader constrainment policy towards China?

In article by Coral Davenport and Ana Swanson, published July 4, 2018 in The New York Times, the negative impact of a whack a mole tariff approach is highlighted.

Even as the president’s pro-business stance is broadly embraced by the corporate community, in some significant cases the very industries that Mr. Trump has vowed to help say that his proposals will actually hurt them. They also warn that policies designed to aid one group will eat into someone else’s business in ways that policymakers should have anticipated.

“I would like to tell the president, ‘Man, you are messing up our market,’” said Kevin Scott, a soybean farmer in South Dakota and the secretary of the American Soybean Association. The idea of changing Nafta, he said, “gives us a lot of heartburn in farm country.”

At the same time, Mr. Scott said, China’s threat to impose tariffs this weekon United States soybeans — in direct response to Mr. Trump’s tariffs on other Chinese-made products — is already having a negative effect on the prices farmers see. In recent days, Canada imposed its own retaliatory tariffs against the United States. And on Friday, General Motors warned that Mr. Trump’s threat of tariffs on imported cars could backfire, killing American jobs and leading to “a smaller G.M.” 

Mr. Scott voted for Mr. Trump, and he approves of administration efforts to roll back environmental regulations, “But if we lose those Chinese and Mexican markets, it will be hard to get them back,” he said. China and Mexico are the two biggest markets for American soybean exports.

Richard Newell, president of Resources for the Future, a nonpartisan research organization in Washington, described the administration’s overall approach as “whac-a-mole policy” that suggests a lack of appreciation of the complexity of global commerce. “The law of unintended consequences abounds,” Mr. Newell added.

 And the “whac-a-mole policy” clearly provides the Chinese with very significant maneuvering room globally as well.

In today’s London Times, the Chinese approach is identified and discussed.

Chinese state media have been ordered to mount a propaganda campaign to help the government in its trade war with the US.

According to a leaked government directive from Beijing, a notice to news groups warns that “all media should prepare well for protracted conflict”. Retaliatory tariffs are due to take effect tomorrow.

“The trade conflict is really a war against China’s rise, to see who has the greater stamina. This is absolutely no time for irresolution or reticence,” it said.

The US is expected to impose $34 billion of tariffs on Chinese goods, in addition to a 25 per cent tax on steel and 10 per cent on aluminium imports already in place.

The notice, said to have been distributed to news outlets by the Communist Party’s central propaganda office, outlines a broad strategy aimed at calming markets domestically while encouraging division among President Trump’s supporters.

“We stop negotiation for now, acting tit for tat, roll out corresponding policies, hold public opinion at a good level without escalating it, limit scope, and strike accurately and carefully, splitting apart different domestic groups in US,” the notice, first published by the website China Digital Times, said.

The memo also warns the Chinese press not to carry any quotes from Mr Trump or any US official in its reports. “Don’t attack Trump’s vulgarity; don’t make this a war of insults,” it said.

 And the global reach of the Chinese approach is highlighted as well.

“In essence the US measures are attacking the global supply chain and its value chain,” Mr Gao said, noting that $20 billion of the Chinese products to be punished with tariffs were made by foreign companies in China. “Simply put, the American government is firing shots at the whole world. It’s firing shots at itself, too.

“The US side has made similar threats to other countries and regions. Such trade bullying acts are against the trend of the times. China will not bow its head before threats and extortions, neither will China waver in its determination to safeguard the global free trade and multilateralism.

“China will stand with the rest of the world in resolutely opposing protectionism, which is backward, antiquated and inefficient, and unilateralism, which turns back the wheels of history.”

The Economist in their July 5, 2018 edition also highlighted the potential for China to reach out to US allies to rally them in an effort to deflect US pressures as well.

From steel tariffs on Japan to threats of auto tariffs on Europe and negotiations that might wreck the North American Free-Trade Agreement, Mr Trump is taking on every one of America’s allies.

China has tried to rally them to its side. It has asked the European Union to join it in condemning Mr Trump’s trade actions, according to Reuters (the EU declined because of its own trade grievances against China).

Even as it raised tariffs on soyabeans from America, it removed them from soyabeans from India, South Korea and others in Asia. Xi Jinping, China’s president, has hinted that its markets will become more open to non-American firms

Renegotiating agreements makes sense; working with allies to shape new ways to deal with the Chinese is certainly an important effort; but tariff battles with allies without a coherent negotiating strategy simply opens the field for the Chinese to protect and even promote their interests.