Published: Mon, April 09, 2018
Culture | By Antonia Gonzales

View from Away: Is this trade war necessary?

Trump hit back again late Thursday, instructing trade officials to consider tariffs on an additional $100 billion in imports. Any sharp escalation of the US-China trade war is likely to drag down global trade growth and hurt India.

"If the USA side disregards opposition from China and the global community and insists on carrying out unilateralism and trade protectionism, the Chinese side will take them on until the end at any cost", the Ministry of Commerce said in a statement on its website.

In the latest round of the trade war, the Trump administration rattled market bulls last week by calling for 25 per cent tariffs on $50 billion in imports from China.

The statement followed China's pledge to impose tariffs on almost $50 billion in imports from the US.

China responded with proposed tariffs on fresh fruit, pork and recycled aluminum, accounting for $3 billion of U.S. exports past year. China shot back 11 hours later with a list of proposed duties on $50 billion of American imports, including soybeans, aircraft, cars, beef and chemicals. China wasted no time in firing back with 25-percent tariffs on imports of 106 USA products, including soybeans, automobiles, chemicals, and aircraft. "China, the United States and the world economy", former U.S. Treasury Department official Christine McDaniel, now with the Mercatus Center at George Mason University in Virginia, told an Australian news agency.

The real battle will come when America decides not to allow China to dominate the industries of the future by flaunting the rules that have governed the global trading system since the end of World War II.

"In 2016, Limestone County produced the most soybeans in Alabama with 2.2 million bushels", according to the Alabama Farmers Federation.

Asked in an interview with NY radio station WABC about the effect on USA stock markets, Trump said the market has gone up (since he took office) "so we might lose a little bit of it".

His concerns were echoed by Alexander Salitsky, an analyst at the Russian Academy of Sciences' Institute of World Economy and International Relations, who warned that a trade war between Washington and Beijing would first and foremost affect the global markets for raw materials, oil and natural gas, aircraft and vehicle manufacturing, as well as electronics and agricultural products. "Trade deficit" sounds bad, but a trade deficit makes up a large chunk of the U.S. current account (payments flowing out) and is offset by the United States capital account (payments flowing in). Chinese and USA officials haven't held talks "for a period of time" on any economic or trade issues, Gao said.

U.S. exports to China are equivalent to less than 5% of the output of the agricultural and other primary products industry.

Trade wars, by contrast, are sure to cause economic harm in the short run - including higher prices to consumers, lost sales to farms and factories, and a drag on the US economy.

Serious talks "have not really begun yet", Larry Kudlow, head of the White House National Economic Council, told Bloomberg TV.

"Raw material prices, already on an uptrend since mid-2017, will likely be pushed up further as hoarding and speculation take place in anticipation and reaction to tariffs", he added.

The International Monetary Fund also expressed concern, saying the proposed tariffs would likely damage the USA economy and those of other nations.

Gao's comments came shortly after Trump defended his proposed tariffs, saying the move might cause "a little pain" but the United States would be better off in the long run.

In the CNBC interview, Mnuchin avoided directly answering whether the United States and China were in active negotiations to avert a trade war.

The estimated value added in American exports to China accounts for only 0.5% of total value added in the U.S. economy.

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