White House: ‘China Has A Lot More To Lose’ In A Trade War

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June 20, 2018Jun 20, 2018

The Trump administration stressed Tuesday that China “has a lot more to lose” in the ongoing trade spat between Washington and Beijing.

President Donald Trump, in accordance with the provisions of Section 301 of the Trade Act of 1974, imposed steep tariffs of 25 percent on critical Chinese products worth an estimated $50 billion annually on Friday, leading China to return fire with reciprocal tariffs on American goods. Troubled by China’s reaction, the president announced Monday that he has directed the Office of the U.S. Trade Representative to “identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent.”

Beijing accused the U.S. Tuesday of initiating a trade war, warning that it will defend its national interests. “This is a trade dispute, nothing more, nothing less,” White House trade adviser Peter Navarro explained in an on-the-record briefing, downplaying Beijing’s assertions. China “underestimated the strong resolve of Donald J. Trump,” who is determined to “have the back of Americans” and combat serious Chinese “economic aggression.”

“China has more to lose. They have a choice to make,” Navarro said Tuesday. “The numbers speak for themselves. Do the math.” The U.S. exported goods worth only $129.69 billion to China in 2017 while importing a substantial $505.47 billion of Chinese goods. Retaliatory Chinese tariffs would be limited by the trade imbalance between China and the U.S., forcing the Chinese to turn to non-tariff measures should it desire to escalate.

For instance, China could decide to create procedural and regulatory roadblocks for U.S. products entering the country, limit access for American businesses, disrupt the domestic operations of U.S. companies, throttle deals and acquisitions, manipulate its currency or even boycott American products. More severe measures, as Reuters noted, could include the weaponization of U.S. treasury holdings or an embargo on American goods.

“There are so many ways they could do this,” Dr. Scott Kennedy, a leading expert on the Chinese economy at the Center for Strategic and International Studies, told The Daily Caller News Foundation. “They’ve done it so many times to others.”

The Chinese are “not hobbyists at protectionism,” he added, explaining that Chinese warnings that it will defend its interests are “not empty threats.”

At the same time, the U.S. could return fire with non-tariff actions. “China is the surplus trader. It exports a lot to the United States, final goods that employ millions of Chinese workers. China depends heavily on American technology, know-how, management skill, access to the American banking system, key technologies like semiconductors [as we’ve seen with the ZTE case],” Kennedy explained. “If this relationship were to come to a standstill or be limited severely, it would have a larger affect on China than the United States. From that perspective, the U.S. does have leverage.”

But, the U.S. stake in the relationship is not insignificant.

“China is one of the United States’ largest trading partners, and China is central to global production networks,” Kennedy told TheDCNF, adding that the “U.S. would stand to lose quite a bit” in a total trade war.

The ongoing trade war has been months in the making.

The Trump administration, following a detailed investigation, revealed in late March it planned to punish China with tariffs on roughly $50 billion in Chinese products for China’s theft of American intellectual property, as well as the perpetuation of other unfair trading practices. In trade talks, the U.S. pushed Beijing to significantly reduce the trade deficit by $200 billion and pursue structural reforms to eliminate America’s disadvantage brought about by unfair trading practices. The White House trade adviser revealed Tuesday that these demands have been met with resistance.

China offered to buy tens of billions of dollars in agricultural and energy products as a simple concession, but the president argued that this offer simply was not good enough. The deal was taken off the table as the U.S. moved ahead with tariffs on Friday. The administration has repeatedly emphasized that it will not accept a bad deal that fails to protect American interests in the way it envisions.

In particular, the tariffs target China’s ambitious Made in China 2025 plan, a state-funded program meant to facilitate Chinese dominance in strategic emerging industries, such as advanced manufacturing and new technology. In addition to government subsidies, the program relies heavily on traditional Chinese practices for the acquisition of foreign technology.

The Trump administration is determined to ensure that China does not secure dominance in critical industries through stolen American innovation. Treating China’s behavior as a national security threat, the U.S. is increasing the pressure on Beijing.

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