By: Kendjana Adolphe
As the world waited in anticipation for the US the U.S. increase the tariffs on Chinese goods once again, which was scheduled for March 1, President Donald Trump on Feb. 24 declared that he would delay this increase. Trump cited “productive” trade talks as the reason for this delay and mentioned that if both sides make additional progress he and Chinese President Xi Jinping would meet to seal a deal. However, this comes after Trump engaged in a “trade war” with China last year. How did the events of the “trade war” unfolded and what has been the impact of the economy as a result of these event?
After years of economic disputes between China and the U.S.A., the President of the United States, Donald Trump finally took a stand on the situation. On Sept. 17, 2018, in a statement released on the White House website, he declared that the U.S. is imposing tariffs on $200 billion of imports from China for its unfair trade practices towards the U.S., which brings the number of goods taxed to $250 billion for now. President Trump, taking advantage of America’s economic strength and China’s economic slowdown, scheduled a new wave of tariffs effective Sept. 24, 2018, starting from 10 percent and climbing to 25 percent Jan. 1, 2019. This comes after Trump imposed 25 percent tariffs on $50 billion worth of Chinese products in June 2018.
Before Trump’s presidency, Trump accused China of unfair trade practices. Credit: @readDonaldTrump
Trump also threatened to impose more tariffs worth an additional $267 billion on Chinese products if China retaliates against U.S. farmers or other industries. Trump explained his stance in the same statement issued Sept 17.
“For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies,” said Trump, according to the statement. “We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices.”
The trade tariffs are indeed aimed at pressuring China to change longstanding trade practices that President Trump said impact negatively the American businesses. According to Dr. Marco Rimanelli, professor of political sciences at Saint Leo University, these practices do not only consist of trade exchanges. After China turned economically capitalist, it developed predatory capitalist behaviors.
“China brought in companies from America and Europe to do business in China using the Chinese label and export around the world. They played with the currency by promoting their exports to America and tying the exchange rate of China’s currency below the exchange rate of America,” said Rimanelli.
On the other hand, the Chinese have been stealing technological information. He added that “China goes around the world and steals everything they can have a hold on through espionage.” Dr. Rimanelli said that America recently got proof of the Chinese representing Huawei Technologies “trying to steal actual technology while visiting an American corporation including pieces of that technology.”
Dr. Zachary Smith, professor of economics and finance at Saint Leo University also commented on this imposition of taxes and quotas on foreign goods, which he believes will have a negative impact. According to him, the U.S. should allow markets to determine who produces what, how they produce it, and for whom they produce it for.
“As the United States levies tariffs and imposes quotas on foreign goods, this increases the cost of those goods for citizens in the United States. In response to increases in tariffs, other countries are likely to impose restrictions on goods that we send overseas,” said Smith. “In the end, restrictions on free trade typically make everyone worse off and lead to suboptimal global resource allocation. Further, when governments interfere in markets, they typically have to make choices about who is going to be helped by their policies and who are going to be harmed, which causes them to be influenced by winners and losers associated with their political agendas.”
Republican Brad Sherman said, “We’re now told that this is Trump’s trade war. No, China declared a trade war on the United States 18 years ago.” Credit: @CNNPolitics
Another negative effect is retaliation. In fact, sometime after Trump’s announcement on Sept. 17, China retaliated. In a brief statement, the Chinese Commerce Ministry posted online on Sept. 18: “to protect its legitimate rights and interests and order in international free trade; China is left with no choice but to retaliate simultaneously.”
Therefore, China declared that it would place an additional five percent in duty on U.S. products such as smaller aircrafts, computers and textiles and an extra 10 percent on goods including chemicals, meat, wheat and wine.
For the past several months, starting in Sept. 2018, the presidents of China and the U.S. attempted to meet, but there were various canceled talks. However, during the G20 summit that took place in Dec. 2018, in Buenos Aires, Argentina, both presidents, Trump and Xi Jinping agreed to a temporary trade truce (90 days)—no additional tariffs after Jan. 1.
China’s Foreign Minister said in a statement that the meeting was “very successful, the two sides proposed a series of constructive plans on how to properly resolve existing differences and problems.” President Trump certainly feels positive as well.
“It’s an incredible deal. It goes down if it happens, it goes down as one of the largest deals ever made,” he said Dec. 1 as reported by the White House. “And it’ll have an incredibly positive impact on farming, meaning agriculture, industrial products, computers — every type of product.”
The cease-fire leaves American tariffs in place on $250 billion in Chinese goods. As agreed, the two countries have until March 1 to find a trade deal, which trump has extended. According to Rimanelli, if the two countries don’t find a deal, the tariffs will be imposed fully for both countries, and on top of that, the Americans will impose another 25 percent in taxes.
However, Smith disagrees with imposing restrictions on foreign goods. He believes that “a better alternative would be to allow the markets to make their own choices through the pricing mechanism.”
