Published: Mon, April 09, 2018
Life&Culture | By Peggy Hughes

China and Trade War Tactics

China and Trade War Tactics

"We still think a trade war can be avoided, but our confidence has been shaken; Donald Trump is itching for a fight and the Chinese will not tolerate public bullying from him", Horizon's Greg Valliere writes.

China warned on Friday it was fully prepared to respond with a "fierce counter strike" of fresh trade measures if the United States follows through on President Donald Trump's threat to slap tariffs on an additional $100 billion of Chinese goods.

In a speech yesterday, Trump said "in light of China's unfair retaliation", he had instructed trade officials to "consider whether US$100 billion of additional tariffs would be appropriate".

But if this spirals into a bigger conflict between the world's two biggest economies, it's worth keeping something in mind: In a trade war, the usual rules of commerce may not apply. "So essentially if this becomes a reality two months later, this will be a disastrous situation for US agriculture". The Dow was down 700 points late in the day. American net farm income in 2018 is expected to fall to a 12-year low, according to USDA Economic Research Service's most recent 2018 Farm Sector Income Forecast. Our neighbors in Nebraska and South Dakota face similar economic pain.

Is it possible that the USA could actually benefit from a tariff war? In a speech at the Economic Club of Chicago on Friday, Fed chair Jerome Powell said it was "too early to say" what the result of a trade war would be on the US economic outlook.

Chinese state media yesterday denounced Mr Trump's latest threat, with nationalistic tabloid Global Times saying it reflected "the deep arrogance of some American elites in their attitude towards China".

The statement followed China's pledge to impose tariffs on almost $50 billion in imports from the US. We make them worse off if we stand between them and say "thou shalt not".

The U.S. tariffs target the high-end technology products made in China.

While US officials said they were prepared to talk the issues through with China, there was no clear path to communication. Within hours Beijing retaliated with the promise to hike levies on $50 billion worth of United States imports by 25 percent. When China initially announced a 25 percent tariff on US beans, the market collapsed by over 50 cents per bushel, a loss of nearly 5 percent in value overnight.

The White House said yesterday it has initiated a World Trade Organisation dispute against China and is examining potential restrictions on Chinese investment.

Part of the surprise at Trump's populist turn this year is that so much is going right in the USA economy.

"Raw material prices, already on an uptrend since mid-2017, will likely be pushed up further as hoarding and speculation take place in anticipation and reaction to tariffs", he added.

The secretary tried to assure investors that Trump's willingness to fight for U.S. interests would be a "long-term positive" for American companies.

That was backed up by Trump's chief economic adviser, Larry Kudlow, who said tariff negotiations with China had not started.

He also said no negotiations were likely in the current circumstances.

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