US and China Prepare for Trade Clash

The previous time when Washington prepared for a trade clash, the president was Ronald Reagan and Japan was the adversary. Today the White House is preparing for a similar type of situation which is a mix of tariffs and the quotas are typically aimed at Chinese imports. It actually has sights on almost everything ranging from steel to solar panels and washing machines. A record trade surplus of China with the United States was announced in the previous week which is a potential catalyst for hostile behavior after a year of bluster from US president Donald Trump. This is certainly not a trade war but if it happens so, it will be quite similar to the one that took place in the 1980s over cars, semiconductors and television sets from Japan.

This time, the forces are more evenly matched since the United States has never been at a trade war with an opponent like China in terms of the size of the economy, industrial capabilities and global ambitions at the same time. When the same trade war happened previously, Japan was an ally of the United States but in this case China is increasingly a rival which raises the risk of a counter attack especially because of the support for Beijing is crumbling throughout the political spectrum of the United States as well as in the business community of the nations at the same time which is traditionally a strong advocate for the trade of China. In this brewing battle of trade which is fuelled by protectionists in both the US and Chinese camps where each of the sides has an exaggerated sense of their own advantages.

Scott Kennedy who is an expert on Chinese industrial policy at the Center for Strategic and International Studies which is actually a Washington-based think tank mentioned that a trade war is coming because of ideological extremism and absolutely contradictory estimates of who has more leverage. The global markets seem to be absolutely unprepared for what could result into a clash of the titans. Besides the nuclear threat of North Korea, the trade war between the United States and China could turn out to be the biggest potential economic spoiler of the year 2018. Once the trade war is under way, its effects would be felt beyond the combatants themselves. The friends and allies of the United States along Asian supply chains would be facing early collateral damage.

February 20, 2018 - 11:59
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