China warns ‘tariffs’ will create economic ‘tsunami’
But ‘Xi has a lot of incentive to swallow his pride and start negotiating with Trump quickly’
President Donald Trump branded United States allies and adversaries as “cheaters” and “scavengers” after launching a tariffs “tsunami.” He accused them of “ransacking” US “factories” and “stealing jobs,” while tearing apart the “American dream.”
Public enemy number one was China as the shadows of “protectionism” from the 1930s lengthened across the world. Beijing’s response was swift, accusing Trump of “bullying.”
“The specter of a trade war looms large, with no winners in sight and the surge of protectionism offering no viable path forward,” the state-controlled China Daily stated today.
“Imposing so-called reciprocal tariffs on its trading partners is like an undersea earthquake, [creating] a tsunami of turbulence and trouble for the global economy,” it said in an editorial.
By the numbers:
- Trump’s “Liberation Day” announcement earlier this week added 34% “reciprocal” tariffs to existing 20% duties on Chinese exports to the US.
- That has edged closer to the 60% figure he had threatened on the presidential campaign trail last summer.
The impact of these new tariffs will be quite damaging to [China].
Bill Bishop, founder of Sinocism
Delve deeper: China’s ruling Communist Party has warned there will be “no winners” in a trade conflict. The Ministry of Commerce also threatened “resolute countermeasures to safeguard” the country’s “rights and interests,” but refused to elaborate.
Between the lines: Still, that will be challenging for an economy hooked on overproduction and reliant on exports, which make up nearly 20% of GDP. Consumer spending in China has slowed amid a property crisis while soaring local government debt poses significant risks.
Bottom line: “Unless tariffs come down, US trade with China will dry up,” Brad Setser, who served at the Treasury during the Obama administration, told Politico.
Big picture: “No matter the reaction, the impact of these new tariffs will be quite damaging to [China’s] economy, and so Xi has a lot of economic incentive to swallow his pride and start negotiating with Trump, and quickly,” Bill Bishop, the founder of the Sinocism, said.
China Factor comment: Trade feuds and tariffs plunged the planet into a Great Recession in the 1930s with Washington at the epicenter. What followed was political upheaval and World War II. Forgetting the lessons of history risks repeating them.