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Analysts upbeat about China riding out trade war with US
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Analysts interviewed by Chinese media are sanguine about the prospects of China being able to sustain a protracted trade war with the United States while persisting in its efforts to reform and open up.

The United States finally started the trade war with China. On Friday morning, the Trump administration began to levy a 25 percent tariff on $34 billion worth of Chinese goods, which activated China’s counter measure of same level tariff also on $34 billion in American imports.

Lu Kang, spokesman of the Chinese Ministry of Foreign Affairs, said at a regular press briefing on Friday that after the US slapped the “unfair” tariffs, China’s tariffs on American products had immediately gone into effect.

According to the US Customs and Border Protection (CBP), an additional 25 percent tariff was imposed on 818 Chinese goods worth $34 billion from 00:01am local time. Chinese media asked analysts to give their opinion on how long the trade war will continue, and if China could sustain damages inflicted on its economy.

A protracted ‘war’

Timothy Stratford, former assistant US Trade representative and partner of Covington & Burling, told Caijing both sides are now steadfast without showing any sign to backing down, so the trade frictions would haunt for a while, and “we’ll head into a pitch-black tunnel ... until both parties are compelled by circumstances to review their stances.”

China and the US began to engage in trade talks last year. After several rounds of negotiations, they failed to reach a basic consensus. This May, when the delegation led by US Treasury Secretary Steven Mnuchin came to Beijing, they required China to cut bilateral trade deficit by $20 billion, promise to eliminate subsidies linked to “Made in China 2025” industrial policy and cut tariffs significantly.

China was willing to ramp up American imports while cutting tariffs on products including automobiles. And China asked for the Chinese enterprises making investment in the US to be equally treated, and suspend the 25 percent punitive tariffs proposed as a result of the 301 investigation.

Yu Yongding, member of the Academic Committee of the Chinese Academy of Social Sciences (CASS), also predicted that the trade war will be a long-lasting one in an interview with the China News Service. “Trade frictions between China and the US have a long history and are complex, which means the impasse could hardly be dealt with through one or two rounds of talks, or in one or two years.”

China’s high-tech sector being targeted

An editorial in the China News Service said the US Government has started a ‘war’ actually not to cut trade deficit but to contain the development of China’s high-tech industries. “Also, (the US aims to) use this as an opportunity to set up a new global trade order, aiming to rearrange how the major powers benefit from the system at its own will.”

The US Trade Representative’s office announced on June 15 to impose a 25 percent tariff on $50 billion worth of Chinese imports. The tariffs will be implemented in two phases: first, the imposition will be put on $34 billion worth of Chinese goods from July 6; second, it’s expected $16 billion worth of Chinese products will follow suit from August.

The list of targeted Chinese imports was first released in April and then later amended with several consumer goods removed. Now, among the 1,102 Chinese products on the new list, only one percent are consumer goods, and all the rest are industrial products or semi-products.

Nick Marro, an analyst with the Economist Intelligence Unit, told Caijing the first batch included many things like parts for consumer electronics like LCD or LED display, while the second batch mainly includes high value-added goods that are vital to supply chains, for example, integrated circuits. Marro believes the second round of tariffs, once effective, will cause deeper collateral damage.

An official with the Trump administration was quoted as saying in April that the tariffs are aimed at dampening enthusiasm of Chinese businesses to export while the tariff on semi-finished products is supposed to wean the American supply chain off its reliance on Chinese parts.

Fighting with an open mind

Observers are confident about China’s capability to ride out the crisis. “Considering China’s big market, determination to open up and advantages brought by its political system, its capacity to sustain damage should be stronger compared with the US,” said Tu Xinquan, the head of the China Institute for WTO Studies of the University of International Business and Economics.

Bai Ming, deputy director of the International Market Research Institute, a research affiliate of China’s Ministry of Commerce, said that problems and defects on the US side would surface as time goes by with China’s retaliations proving to be effective.

Analysts advised China to stick to its road of reform and opening up. “China must adopt a more open attitude in fighting the trade war,” said Zheng Yongnian, director of the East Asian Institute of the National University of Singapore.

Yu Yongding agreed that the country must not allow bilateral trade frictions to affect its initiatives to keep reforming and opening up.

The country has made clear its determination to do so. From June 28 to July 1, a series of major opening-up policies had been rolled out, which include further shortening the “negative list” for foreign investment, streamlining procedures for foreign companies to register business in China and significantly cutting tariffs on imported products including automobiles, auto parts, cosmetics and aquatic produce.   

 


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