Experts warned Thursday that the United States and China are
barreling towards a potentially catastrophic trade war, citing each
country's increasingly heated rhetoric and unique economic pressure
points.
Most Asian stock markets were holding early Friday, in
an early sign that investors—for now--are brushing off concerns about
the brewing brouhaha between the world's two biggest economies.
President Trump on Thursday called for Robert Lighthizer, the U.S. trade representative, to consider $100 billion in additional tariffs against China. The two nations have already slapped each other with planned tariffs totaling $50 billion this week.
But economic analysts said the situation -- which some U.S. news outlets have already branded a "trade war" -- could change rapidly, especially given the nations' ongoing war of words.
“This is what a trade war looks like, and what we have
warned against from the start,” National Retail Federation President and
CEO Matthew Shay said in an interview with Reuters.
For their part, Chinese officials said they won't capitulate to U.S. demands.
China and the U.S. have exchanged plans to impose sweeping tariffs on each others' exports this week.
(Copyright 2016 The Associated Press. All rights reserved.)
"If someone wants a trade war, we will fight to the
end,” Wang Shouwen, China’s commerce vice minister, told reporters
Wednesday, after announcing a planned tax on U.S. goods, including
airplanes and soybeans, the biggest U.S. export to China.
CHINA PROMISES TO FIGHT US 'AT ANY COST' AFTER TWO SIDES THREATEN HUGE TARIFFS
One trade policy expert specifically faulted Trump's communications strategy in an interview with the AP.
"Mr. Trump is upping the ante, but the lack of a clear
game plan and an incoherent messaging strategy from the administration
is setting this up for an all-out trade war rather than a fruitful
negotiation," said Eswar Prasad, professor of trade policy at Cornell
University.
"I like to say that there is a pot of gold at the end of this rainbow."
Chinese officials know they can effectively target
specific sectors of the American economy, experts said, decreasing the
likelihood that they will feel the need to retreat from the brink.
“The American agricultural sector is quite influential in the Congress,” Peking University economics professor told The New York Times. “China wants the American domestic political system to do the work.”
Some of that work was being done by Nebraska Republican
Sen. Ben Sasse, who said this week that Trump was “threatening to light
American agriculture on fire" and calling the White House's approach
"the dumbest possible way to do this.”
China, by contrast, has unique tools to counteract U.S.
tariffs, according to analysts. President Xi Jinping's government
controls huge swaths of the country's economy and has an iron grip on
the press, which would insulate the administration from some political
and financial pressures in the short-term.
“My impression is that there is in Washington an
exaggerated sense of how painful these tariffs might be” in China,
Gavekal Dragonomics director Arthur R. Kroeber told the paper.
But as President Trump noted on Twitter on Wednesday,
the U.S. runs a significant trade deficit with China, giving the White
House its own blunt leverage.
"We are not in a trade war with China, that war was
lost many years ago by the foolish, or incompetent, people who
represented the U.S.," Trump wrote. "Now we have a Trade Deficit of $500
Billion a year, with Intellectual Property Theft of another $300
Billion."
Trump economic advisor Larry Kudlow told Fox Business
that negotiations are underway, suggesting that talk of a trade war is
premature.
“There is a process here, there’s going to be some back
and forth, but there’s also some negotiations and we may talk about
that, but that’s the key point," Kudlow said, describing Trump as "the
first guy with a backbone in decades" to take some action on China — "at
least preliminary actions."
Kudlow downplayed the urgency of the situation, saying tariff discussions won't play out overnight.
“In the United States at least, we’re putting it out
for comment, it’s going to take a couple months," he said, referring to
the proposed new tariffs. "I doubt if there will be any concrete action
for several months. ... Trump’s putting his cards on the table. He’s
standing up for this country, but he’s also standing up for better world
trade.”
China on Thursday also formally challenged the U.S.
tariffs at the WTO, setting the stage for a potentially lengthy legal
battle.
The result of all the tension and brinksmanship, the
White House says, will be a fairer international business climate for
U.S. industries.
"I like to say that there is a pot of gold at the end of this rainbow," Kudlow told Politico this week.