US tariffs on Chinese goods ordered by President Trump will result in a backlash from China. It may also result in a trade war with China. The US is to apply up to 25% tariffs on C up to $50 billion of Chinese goods. This said to be a result of the so-called theft of US intellectual property by China. Donald Trump claims that China is stealing US technology and using it to compete against US trade.
Nobody Wins a Trade War
China has stated that it will respond with likewise tariffs on US goods. While world leaders throw their rattles at each other their countrymen will suffer. Nobody wins from trade wars, and after Trump’s reaction at the recent G7 meeting, we all wonder what the heck is going on? The US has already kicked off a trade war with the EU, UK, Canada, and Mexico
Rather than agreeing that trade between the US, EU, UK, China and Canada is beneficial to all countries, one person decides that it would be better to apply tariffs and start a trade war. Everybody loses from trade wars, and the current high employment level of the US might now be temporary. While the US may well have a valid argument, it does not have the high volume trade with the rest of the world that China has.
China and EU Focusing on Long-Term Economic Development
China will lose a lot less then the USA will from this type of trade war. Only a maximum of $500 billion of the annual $2 trillion of Chinese exports goes to the US. So China will not be hit too badly by this decision. The US, however, has few significant export partners other than China and the EU. Canada and Mexico excluded, as President Trump has already done!
China has recently been developing trade partners in Africa and Latin America. It has achieved this by funding a number of infrastructure developments in these areas. This is sure to provide China with trade opportunities with consumers who have already been exposed to Chinese brands.
US Tariffs on Chinese Goods May Work Against It
It appears that political posturing is less likely to lead to economic success than a regime that focuses on economic success. While the EU and China are working on longer-term economic development, it appears that the US is focusing on the short term. This may result in short-term gains for President Trump, but longer-term gains for China and others. US tariffs on Chinese goods might well work against the interests of the US.
