Chinese and US protectionism is putting the global trading system at risk. The current international trading system has been developed over the past generation and has been working well. However, Donald Trump’s protectionist trading policy, and the likewise response by China, has compromised this.
US Jobs at Risk?
It is inconceivable that a trading policy that has taken millions of people out of abject poverty has been put at risk in this way. Because of tit-for-tat tariffs that does neither the US nor China any good! The ultimate result will be a fall-off in growth, particularly within these two countries, and a likewise loss of jobs. US jobs are sure to be lost as China cuts back on imports from the US, and likewise for jobs in China.
Intellectual Property Theft the Main Issue
Christine Lagarde, the Managing Director of the International Monetary Fund (IMF), stated Wednesday in Hong Kong that “Governments need to steer clear of protectionism in all its forms.”
The US is correct in its complaints regarding China’s theft of IP (Intellectual Property). It could be argued that the US should have taken steps to protect its IP through the development of protective measures. It was known that China does this, and this is an area of development that has to be pursued.
Chinese and US Protectionism a Danger to Global Trading
The tariffs applied by China and the US on each other are setting a dangerous precedent. Chinese and US protectionism will have the effect of reducing growth and employment in the US and China. European Central Bank economists have stated that such changes in global tariffs may have a negative effect on world trade. This could contract by up to 3% with a 1% reduction in global growth.
It has all been said before. However, both Donald Trump and Xi Jinping (pron. Chee Jinping) appear to believe that normal world economics do not apply to them. Or maybe they do – neither side has yet put the measures announced into effect. That is a possible reason why the respective economies remain unaffected.
Economic Saber Rattling?
The tariffs announced on each other’s main exports run into hundreds of billions of dollars. This will certainly have an effect on demand, with a consequent loss of business for the firms concerned. Lagarde has in effect given each leader a tap on the wrist as a warning as to the effect their disagreement could have on world trade.
Will the Chinese and US protectionism threats be put into action? We shall soon find out, and it would be a bad day for world trade and employment if they were more than just rhetoric and economic saber rattling.