In response to the trade war declared by the current U.S. administration, as many as 60 countries – according to Washington’s claims – have responded with a proposal for an agreement. Among them is the European Union, which offered Trump a model of ‘zero for zero’ tariff elimination. A similar proposal came from Vietnam, an increasingly important Asian manufacturing hub where some American companies, such as Nike, produce their goods.
However, they quickly realized that a conciliatory tone does not resonate with this American administration. Trump and his economic advisors, such as Peter Navarro, rejected the European and Vietnamese proposals, stating that tariffs are not the only problem, but also the value-added tax, which they now consider a trade barrier. A number of economists believe that one must approach the American administration with kid gloves, trying to offer a solution that will satisfy America and that one should not resort to the usual means employed by countries in mutual relations – responding to a blow with the same measure.
Mistake of mistakes
Such an approach is being applied by the only economic power that can compete with the U.S. on a global scale, which is China. Perhaps precisely because of its size and importance, the sharp Chinese stance could yield exactly what the ‘peaceful’ group of countries hopes to avoid – further escalation of the trade war. After U.S. President Donald Trump threatened China on Monday with an additional 50 percent tariff if they do not withdraw their retaliatory measures within 24 hours, China’s Ministry of Commerce stated that it ‘firmly opposes’ this threat and promised to take countermeasures to protect its own rights and interests.
In response, Trump decided to brutally increase the overall tariff rate on Chinese imports to the U.S. to as much as 104 percent. How Beijing will respond remains to be seen. Recall that in response to the U.S. ‘reciprocal’ tariffs of 34 percent, China quickly responded in kind – imposing a 34 percent tariff on all American goods coming into the country, which will begin to be collected on May 10.
– The American threat of escalating tariffs on China is the mistake of mistakes – it is stated in a statement, according to a CNBC report. – China will never accept this. If the U.S. persists, China will fight to the end – the claim of the Ministry of Commerce was later reiterated at a press conference by Lin Jian, spokesperson for the Chinese Ministry of Foreign Affairs. Tariffs on all American products followed two previous rounds of tariffs of 10 to 15 percent, which primarily targeted agricultural and energy products imported from the U.S. However, Beijing also imposed export restrictions on key rare elements, banned the export of dual-use products for 12 American entities, mainly in the defense and aerospace industries, and placed another 11 American companies on its ‘unreliable entities’ list. Specifically, this means broader restrictions on their operations in China.
The American tariffs of 34 percent on imported Chinese goods were added to the 20 percent levies introduced in February, raising the total tariff burden on Chinese imports to the U.S. to 54 percent, and with the latest 50 percent, it climbs to as much as 104 percent. For the previous trade barrier, Morgan Stanley calculated that it could reduce the value of the Chinese economy by 1.5 to two percentage points this year. In such circumstances, China cannot lose much in an additional spiral of tariff violence. – Given that China is already facing over 60 percent tariff burden, it really does not matter whether additional tariffs increase by 50 or 500 percent – said Tianchen Xu, a senior economist at the Economist Intelligence Unit, suggesting that Beijing is ready for a full trade war with the U.S. In his view, China is on the defensive, but essentially both sides are testing each other’s limits.
