Intellectual property is the major issue which led President Trump to apply Chinese import tariffs. China is known to ignore western copyright laws, counterfeiting famous brands and applying pressure on businesses to provide trade secrets in return for access to the vast Chinese consumer market.
Although this may be wrong, it has been going on for many years. Chinese knock-offs of designer brands are nothing new. What is happening is that the Chinese have become as adept at producing designer goods as the original makers. Most people cannot tell the difference between Chinese and American made goods.
Chinese Market and Chinese Import Tariffs are Related
The Chinese market is huge: 1.41 billion consumers compared to the 326 million in the USA last year. This is too large a market to risk losing! Is this the time for the US to put its foot down? Perhaps, but many think not. The world economy, and particularly the US economy, is perhaps too volatile and weak at this time to contain a trade war.
However, if the US feels it the right thing to do, then we shall await the outcome of what is sure to be a tit-for-tat issue with perhaps no foreseeable outcome. Other, perhaps, than an increase in American consumer prices.
Chinese Import Tariffs Will Raise US Consumer Prices
Does the biggest guy always win? What is certain is that Chinese import tariffs will likely raise American consumer prices. Such action also has the danger of leading to fewer exports to the massive Chinese market with the unavoidable impact on US jobs.
The reason given by the US Commerce Department for the US tariffs on steel and aluminum was that their imports from China represented a threat to national security. This kept the tariffs within WTO rules. However, both China and the EU disbelieve the truth of this excuse for an otherwise illegal tariff.
Protectionism not permitted by the World Trade Organization
Protectionism of the kind apparently being carried by the USA is not permitted by the World Trade Organization. The correct procedure in such cases is to present a case to the WTO, and then await a ruling. An official complaint was made by the US to the WTO last week. However, that will take many weeks, or even months, to be dealt with.
If the US goes ahead and applies further sanctions against China, then it will do so against WTO rules. It is highly possible that President Trump will be unwilling to wait. If so, then he would be operating outside of the WTO. The trouble with tariffs is that they raise prices for goods, sometimes essential goods, within the country applying the tariffs.
Excessive Tariffs Result in Price Increases and Job Losses
Tit-for-tat tariffs applied by China will raise prices of US goods in Chinese stores and force the Chinese consumers to buy Asian goods Samsungs in place of iPhones or Apple Macs for example. This results in a reduction in the massive Chinese market for American goods and resultant job losses in the US.
Nobody really wins from protectionism or any other reason for excessive tariffs on imports. This is particularly true for the massive US and Chinese markets. The biggest market usually wins, which in this case is China. Intellectual property theft is certainly an issue, but there may be other ways to resolve this including diplomacy.
