Trade tariffs and trade wars

Within a week of the US administration issuing threats to impose a further $200bn worth of tariffs on Chinese imports, the People’s Republic of China (PRC) formally lodged complaints with the World Trade Organisation (WTO), stating: “The US has violated the WTO rules and launched the largest trade war in economic history to date.”

This follows the filing of a complaint on 6 July to the WTO regarding the US’s earlier round of levies on $34bn worth of Chinese goods, and prompted the PRC to declare that it would continue to make proportional responses should the US continue to escalate its trade war.

Alongside this, and, notably, just as China and the EU were meeting in Beijing for the regular annual summit between the two sides, US President Donald Trump, en route to his summit in the Finnish capital Helsinki with his Russian counterpart President Vladimir Putin, bizarrely declared the EU to be a greater foe of the US than either China or Russia.

Whilst many US economists and ruling-class representatives jumped to bemoan the alienating of the country’s key allies in such a manner, other sections of the US ruling class held that Trump’s methodology of ‘playing hard ball’ with key allies such as Canada and the EU was an appropriate way to gain concessions and reinforce US hegemony.

As the voices become shriller in the denunciation of using tariffs as an economic truncheon, the realisation that levies on Chinese imports will soon start to damage the US economy itself is becoming more prominent in some sections of the US media.

A Voice of America (VOA) news report on 17 July went into more detail as to the implications, referencing a predicted 20-21 percent increase in shipping costs as a result. As noted in the July 2018 issue of Lalkar, it is knock-on effects such as these which mean that the wider US economy cannot fail to be affected by tariffs targeting specific imported items. (Trump’s trade wars)

Reporting from the port of Long Beach, California, the second largest container port in the US, the VOA report explained that the logistics sector would likely be hit first, causing all trade between the US and China to be affected, rather than just the particular items and products targeted. (Largest US port complex bracing for extended US-China trade war)

Larry Dignan of tech industry analysts Zdnet suggested that the targeting of vital components used for PCs, tablets and smartphones would cause the prices of consumer tech products to rise throughout the holiday season, reducing sales over the second half of 2018. (US vs China trade war likely to hit data centre, IT spending’, 16 July 2018)

A slightly more fretful report from MSNBC warned that while early casualties of Chinese retaliatory tariffs, such as Maine’s lobster fishing and farming industry, which hitherto exported millions of dollars’ worth of lobster to the PRC annually, would be losing out to Canadian competitors that are still able to supply the Chinese market, the overall effects resulting from the imposition of tariffs would in all probability escalate beyond trade, with the likelihood of curbed visas for Chinese students and the slackening of foreign investment due to vetting processes on spurious ‘national security’ grounds, complemented by the PRC imposing ‘administrative punishments’ on US firms operating in the country.

Speaking at the above-mentioned EU-China summit in Beijing, president of the European council Donald Tusk warned that trade wars can quickly develop into hot wars, and that everybody should calm down, urging the importance of holding the current international order together.

The EU member states are conflicted as to how to respond to the present situation. They are disconcerted by many of Trump’s antics and aware that China has, for some time now, been the principal engine of growth in the world economy. They would like to see China make further openings of its domestic market – something that China may well be prepared to concede in certain area and under certain circumstances.

On the other hand, Germany, France and Britain have all recently taken steps to curtail inward investment from China in areas deemed strategic, whilst the parties forming the new Italian government have long had anti-Chinese rhetoric as part of their mainstay.

China’s Belt and Road Initiative (BRI), which aims to enhance infrastructure and connectivity across Eurasia in particular, offers tremendous opportunities to European companies, especially in third countries, but European capitals, to a greater or lesser extent, share Washington’s suspicions of the political motivations behind and the implications of this policy.

Hence Germany, especially, has not hidden its disdain for China’s creation of an institutional link between itself and the CEE 11, formerly socialist countries in eastern and central Europe that are now either EU members or at various stages of the complex admission process, and which met at prime ministerial level in Bulgaria almost immediately before the China-EU summit.

It is important to bear this in mind as part of the wider context of the situation, where many traditional US allies in Europe essentially find themselves operating the old imperialist system as the new trade infrastructure and global development projects spearheaded by the PRC rise up around them.

Whilst imperialism ultimately seeks the total domination of China’s market, it is clear to both the US and European bourgeoisies that a great number of countries are benefiting from China’s initiatives.

The question is how far these two camps may diverge in their tactics and methods in attempting to manage their position.

For now, and for any tempted to take Trump’s tweeting too seriously, be it noted that following his designation of the EU as the USA’s greatest foe, European Commission president Jean-Claude Juncker made haste to Washington. Following a day of talks with the US president, Trump and Juncker were all smiles as they faced the world’s press in the grounds of the White House to announce that peace had broken out and the US-EU trade war was over before it had even started.

The more thoughtful sections of the bourgeois media, from the Financial Times to Hong Kong’s South China Morning Post, were quick to point out that, on the trade front at least, this left the United States free to concentrate all its fire on China.