US TARIFFS: CHINA HITS BACK!

China, the world’s second biggest economy, is leading international retaliation against US President Donald Trump’s wholesale imposition of universal tariffs that has triggered an unprecedented global trade war.

President Trump’s minimum baseline 10 percent tariff on all goods exported from elsewhere into the US, the world’s biggest economy, has set off fear, shock and uncertainty global trade has not seen in recent memory.

Applying the cow-boyish theory of different strokes for different folks, President Trump’s executive order signed amid growing unilateralism saw each nation – big or small – hit with its own specific “reciprocal tariff” that Washington argues only seeks to level the trade playing field that has thus far been grossly unfair to the US. President Trump’s reciprocal tariffs are premised on the mantra “charge what they charge us”.

However, a plethora of economists agree that Washington’s figures fail the equilibrium test, and hugely unfair to just about every country. The premise is therefore flawed. And Beijing is leading the pushback against the onslaught. Hardly before the ink dried on Trump’s executive order, China’s Customs Tariff Commission of the State Council (CTCST) announced its dose of “reciprocal tariffs” against Washington’s imposition of 34 percent additional tariffs on all Chinese goods imports into the US. Starting on April 10, CTCST announced, China will impose additional 34 percent tariffs “on all products imported from the United States”.

Many nations, particularly developing economies, are circumspect and cautious as they seek to react in a way that could prove too detrimental to their trading deals with Washington.

South Africa is one such example. After being hit with a 30 percent tariff, Pretoria opted not to retaliate out of concern to aggravate an already difficult situation.

Responding at a media joint briefing in Midrand, both Ministers of International Relations and Cooperation, Ronald Lamola and Trade Industry and Competition, Parks Tau outlined Pretoria’s response as follows:

“South Africa will continue to build strategic partnerships with other nations enhancing collaboration and our influence in international trade negotiations.”

Such is the microcosm of the emerging danger that lurks against Trump administration’s indiscriminate tariffs China has described as “Washington’s flagrant bullying practice”. The international community will seek to forge new trade alliances that exclude the perceived “bully” and thereby isolating the world’s biggest economy. So, the boomerang effect isn’t too far to fathom.

Leading US economists have warned of high implementation costs and collectively voiced concerns about grave consequences such as higher consumer prices, increased inflation, a rise in unemployment and even economic recession. Reciprocal tariffs, pragmatist economists warn, leads to “reciprocal losses”.

According to a Yale University study, if other countries follow the Chinese example and choose to retaliate, reciprocal tariffs will incur the US a price level rise of 2.1 percent. “This is equivalent to a loss of 2,700 to 3,400 US dollars per household on average,” the study found.

As global trade enters a period of undeniable reality characterized by US hegemony in its rawest form, the one certainty is that China will seek to rise in leading the reconfiguration of the new emerging global trade order where the UN Charter’s founding principle of multilateralism will be placed at the fore.

President Trump’s tariffs would perhaps better be understood if they targeted Washington’s geopolitical adversaries only, instead of including traditional allies. But after hitting the EU imports with a 20 percent tariff, South Korea 25 percent and Japan 24 percent, President Trump said: “In many cases, the friend is worse than the foe in terms of trade.”

This economic alienation of allies will certainly be leaning to the next big economy that China, whose foreign policy that encompasses trade rules is premised on the notion of “shared prosperity”.

As China exhibit no fear of hitting back at Washington, the world is watching as the global heavyweights take on each other.

I believe that in the end, China will come out victorious for a mere fact that Beijing does not seek control over others, only cooperation based on mutual respect and shared benefits.

Chinese businesses are some of the leading investors in the US economy, and Trump’s tariffs will make doing business extremely difficult and near impossible. But Beijing’s restriction on Chinese businesses’ investments in the US will weaken the US economic performance, whilst increasing geopolitical tension amidst deteriorating bilateral relations between Beijing and Washington.

As the EU Commission President Ursula von der Leyen also commented on the Trump tariffs: “The global economy will massively suffer. Uncertainty will spiral and trigger the rise of further protectionism. The consequences will be dire for millions of people around the globe.”

Trump’s approach risks handing over the baton to China to lead the international community through multilateralism. With China at the helm, and Trump’s indiscriminate tariffs at play, the US further risks being consciously sidelined as the new world order maps out Beijing-led global economy that will certainly move forward without the self-harming, isolationist US.