The Chinese vice-minister of commerce said Beijing is ready for a trade war with the United States, albeit reluctantly, if Washington is looking for a fight.
"If the U.S. side disregards opposition from China and the worldwide community and insists on carrying out unilateralism and trade protectionism, the Chinese side will follow through, at any costs, till the end", the Ministry of Commerce said in a statement yesterday.
Party mouthpiece People's Daily also alluded to the shifting Sino-US economic relationship, and that Mr Trump's latest threat showed the US' "sinister intention of using a trade war to contain China's development". The next day, China fired back, matching Trump dollar-for-dollar with a plan to impose import duties on $50 billion worth of American products.
China has threatened its own tariffs on US products like pork and soybeans.
But Chinese tariffs aren't the only ones that will hurt USA companies - Trump's own import taxes could also be a self-inflicted wound. President Donald Trump on Thursday said he would consider adding another $100 billion worth of products to the list of Chinese imports potentially subject to tariffs.
That is doubly true in a potential trade war with China, for several reasons. But given every single political economy decision we've made post-millennium explicitly denied the possibility of, and leveraged us to, any ultimate economic (or broader strategic) contest between the USA and China, it's all a bit of a dark joke to tell us to do it today.
"In 2016, Limestone County produced the most soybeans in Alabama with 2.2 million bushels", according to the Alabama Farmers Federation.
On a NY radio show, the president said short-term economic pain would be worth it. Amid widespread concern and calls for restraint from USA businesses and farm states that are most vulnerable to Chinese retaliation, Trump said on Friday the outcome would be worth the short-term risk. The US has a trade deficit of $375 billion with China and the ongoing trade war would undermine the interests of its farming community, technology companies, automakers, pharmaceuticals and aircraft manufacturers. Taxes will become reciprocal and a deal will be made on intellectual property.
"The American agricultural sector is quite influential in the Congress", said Wang Yong, a professor of economics at Peking University, explaining why China has targeted farm products such as soybeans with possible retaliatory tariffs. Within hours Beijing retaliated with the promise to hike levies on $50 billion worth of U.S. imports by 25 percent.
Meanwhile, Larry Kudlow continued to do the media rounds. In a double whammy to United States industry, our own government is threatening to impose 25 percent tariffs on a range of industrial goods and machinery imported from China.
Nearly by definition, trade wars are negative-sum games and, as such, the chief antagonists would suffer, according to Dr. James Jingdong Wang, associate professor at City University of Hong Kong.
"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. "They are bad economic policy, and both sides have got far too much to lose to build this trade skirmish into an all-out trade war", said David Kelly, chief global strategist at J.P. Morgan Asset Management.
However, he said the White House is willing to negotiate and is in regular contact with Chinese officials.
The estimated value added in American exports to China accounts for only 0.5% of total value added in the United States economy.
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