The U.S. imposes tariffs on aluminium and steel and China responds

 Iliyas ElArif

Conflict has continued between China and the United States with increased amounts of tariffs.

The United States recently introduced tariffs on aluminium and steel and China has responded with similar tariffs, suggesting a potential trade war in the near future.

However, in Beijing, China, there is little belief in this risk.

The U.S. trade deficit compared to China is estimated by Washington to be at approximately $375 billion in 2017.

The United States is currently targeting the omnipresence of Chinese investment and trade in the United States.

However, there is a clear desire to get the Chinese market to be more open.

But in China, Washington’s point of view comes up against the assertion of a simple idea: Americans can not threaten the Chinese market enough if it may or may not be considered stronger than theirs.

This is explained by Ding Yifan, a researcher at the World Development Institute. Yifan stated, “Thanks to its size and development, China’s market for industrial goods has become the largest market in the world. It is more important than that of the United States. Even American cars: it sells more in China than in the United States.”

Yifan continued by stating, “Given the strength of the Chinese economy, it is estimated in Beijing that if the US went so far as to ban Chinese exports, it would not affect the Chinese economy as a whole.”

Chinese exports to the United States are indeed extremely diversified and concern a very large number of sectors.

Exports in the other direction are, on the contrary, concentrated on a reduced number of products.

As a result, retaliation by China against the United States would hit the United States economy much more heavily than counter-measures.

The Chinese serenity against the United States was voiced in the speech on March 10 at the Economic Forum which was held, as every year, in Boao, Hainan Island in southern China.

President Xi Jinping appeared confident of this when, at the beginning of March, the 2,958 delegates of the National People’s Congress granted him, unanimously, the possibility of extending his mandate as head of state for life.

He delivered a particularly peaceful speech, promising “a new phase of opening the Chinese economy.”

The Chinese president also repeated what he said at the Chinese Communist Party Congress in October and stated, “Foreign companies will have greater access to the Chinese financial sector and will be able to control banks and asset management companies.”

China, particularly targeted by Washington recently, armed themselves with a financial and economic council associated with the communist party committee.

It is composed of 20 advisors, consisting of professors and economists, who are in charge of polishing details of Chinese counter attacks to the United States.

The Chinese replies are carefully calibrated and respond quickly to Donald Trump’s initiatives.

The latter, on March 22, spoke of a possible tax on 1,300 Chinese products imported into the United States.

Their value represents $60 billion. The next day, China announced that it could increase taxes by 15% on 128 U.S. products, from dried fruits to steel tubes.

As for American pork or aluminum, the increase would be 25%.

In addition, China’s caution in responding systematically to the American efforts does not necessarily indicate hesitation.

It is believed in Beijing, China that after some Chinese concessions, including those that appeared in Xi Jinping’s speech to Boao, there will come a time when President Donald Trump will declare victory by saying that his threats have managed to bend the Chinese efforts.

However, if this declaration proves to be premature, then a series of additional issues may unfold on the international trading stage.

This hypothesis is very discreetly formulated in Beijing, notably because Donald Trump is known to be often unpredictable.

The next couple of weeks will be critical, as the future of U.S.-China relations will be determined and that will leave an impact on not only the global trade nexus but also on allies of both countries.