Prior to the 12th round of Sino-US trade talks in Shanghai on July 30-31, many hoped the Chinese and US negotiators would put the Sino-US trade negotiation process back on the right track. In fact, after the conclusion of the talks, the two sides termed it “constructive”, and agreed to hold the next round of negotiations in Washington in September. And almost everyone interpreted it as a sign of easing of trade tensions between the United States and China.
But the US made an about turn, threatening to impose 10 percent tariffs on another $300 billion worth of Chinese goods starting Sept 1. As if that was not enough to further raise tensions, on Aug 6, the US Department of Treasury labeled China a “currency manipulator” dealing another serious blow to bilateral ties and causing turbulence in the financial market. The US’ contradictory behavior makes it important for China as well as the international community to double their efforts to ensure trade frictions are resolved through negotiations.
After the 11th round of trade talks ended inconclusively, the US trade representative solicited domestic opinions on Washington levying tariffs on $300 billion of Chinese products. But a majority of the US enterprises opposed this idea. Also, about 53 percent of US citizens oppose Washington’s tariff policy, as higher tariffs on Chinese imports would raise commodity prices in the US and thus make their everyday life more troublesome.
Many US elites in the business and academic circles have publicly opposed the US’ tariff policy. The American Chamber of Commerce in China and National Committee on United States-China Relations have organized former US politicians and transnational enterprises’ senior managers to visit China to find a way to resolve the issue. US-China Business Council President Craig Allen, too, has visited China.
On July 3, 100 eminent personalities, including scholars and former officials, wrote an open letter to the US leader and Congress (published in The Washington Post), saying treating China as an enemy and trying to disconnect it from the global economy won’t contain its rise – instead, it will undermine the US’ interests – and the US’ current approach to China would be counterproductive.
In May, the US government added some Chinese companies including high-tech giant Huawei to its Entity List, which prevented them from purchasing US technologies and high-tech products from US enterprises without the US administration’s special approval.
That the global markets are opposed to the US tariff policy was evident on Aug 1, the day Washington threatened to impose 10 percent tariffs on an additional $300 billion of Chinese goods, as major US stock indexes declined, and crude oil prices dropped that day.
In addition, since those $300 billion of Chinese goods comprise mainly daily necessities including clothes, toys and mobile phones, the additional 10 percent tariffs will raise their prices which will have an impact on US consumers’ life. Actually, US Labor Department data show newly added employment in the US has declined from 230,000 a month at the end of 2018 to 140,000 a month in past three months due to the Sino-US trade frictions.
US businesses seem to agree that additional tariffs on Chinese products will do more harm to US consumers than Chinese exporters, increase unemployment in the US, drag the US economy down, and undermine investment.
Amid all this, the US Federal Reserve has cut the interest rate by 0.25 percent, the first since the 2008 global financial crisis, increasing global uncertainties, which combined with other market factors weakened the yuan beyond 7 per US dollar on Aug 5. The yuan’s exchange rate against a basket of currencies remains stable, though.
By labeling China a “currency manipulator”, the US has conveniently ignored the fact that the turbulence it has caused in the global financial market will seriously impede the recovery of the global economy and international trade, which will deal a severe blow to the US economy.
The author is a researcher at the China Center for International Economic Exchanges China Daily