Xu Yimiao writes that China is running out of retaliatory tariffs against the US and has watched other major parties like the EU and Japan close ranks against it. Before the trade war gets more severe, Beijing’s leaders should seek direct talks with Trump, and may have to swallow their pride.
Some serious discussions are going on in China as the country faces an escalating trade war with the United States, slowing domestic growth and increasing investment restrictions in the US and Europe. There seems to be recognition that the previous playbook drafted by hardliners has not worked and Beijing needs to change its strategy.
Beijing’s strategy of a tit-for-tat retaliation over tariffs has clearly failed. In fact, this strategy escalated the conflict. The direct retaliation after the US announced the first batch of 25 per cent tariffs on US$50 billion in Chinese goods (with the increase from US$34 billion just finalised and coming into effect on August 23) brought few benefits for China. If anything, it gave the US an excuse to plan for a new batch of tariffs covering US$200 billion in Chinese goods. To be fair, it is possible that the US would have escalated the conflict even if China had not retaliated, but whatever the case may be, China’s strategy did not work.
On the evening of August 3, Beijing decided to implement differentiated tariffs over US$60 billion in US exports and on August 8 released a list of an additional US$16 billion worth of American goods to hit with tariffs. Beijing is nearing its tariff retaliation limit.
It was rumoured that Beijing had been trying to line up with the Europeans, as well as other nations, to fend off the tariff threat from the US, but it seems this strategy is not working either.
On July 26, after European Commission President Jean-Claude Juncker’s visit to Washington, the EU and the US reached an agreement on trade. It is true that the joint statement itself is vague and does not mean the trade troubles between the EU and the US are wholly resolved, but in the eyes of Chinese observers this significantly reduced the chance that the Europeans would join forces with China. In fact, European Council President Donald Tusk tweeted that “America and the EU are best friends”. He was echoed by the vice-president of the European Commission, Frans Timmermans, who tweeted, “Europeans and Americans are bound by history and their shared values”.
The development is alarming for Chinese observers as they fear that China is being left behind and is under siege. Trade progress or deals have also been made elsewhere. On July 16, Japan and the EU signed the largest free-trade agreement ever; trade officials from the US and Japan are also meeting this week. It was also reported that Mexican officials expressed optimism about a Nafta deal soon. US President Donald Trump has even talked about the possibility of meeting with Iranian leaders on a “no precondition” basis. It seems that China is the only major country that is not making any progress.
On July 26, after European Commission President Jean-Claude Juncker’s visit to Washington, the EU and the US reached an agreement on trade. It is true that the joint statement itself is vague and does not mean the trade troubles between the EU and the US are wholly resolved, but in the eyes of Chinese observers this significantly reduced the chance that the Europeans would join forces with China. In fact, European Council President Donald Tusk tweeted that “America and the EU are best friends”. He was echoed by the vice-president of the European Commission, Frans Timmermans, who tweeted, “Europeans and Americans are bound by history and their shared values”.
The development is alarming for Chinese observers as they fear that China is being left behind and is under siege. Trade progress or deals have also been made elsewhere. On July 16, Japan and the EU signed the largest free-trade agreement ever; trade officials from the US and Japan are also meeting this week. It was also reported that Mexican officials expressed optimism about a Nafta deal soon. US President Donald Trump has even talked about the possibility of meeting with Iranian leaders on a “no precondition” basis. It seems that China is the only major country that is not making any progress.
Although there is still a chance that the Trump administration will start hitting other counties with tariffs again, once more giving China hope of allying with these other nations, it is clear that they are unlikely to stand with China on other fronts. For example, it is reported that from Berlin to London, the Europeans are tightening their scrutiny over Chinese investments in the name of national security, a move following US footsteps.
This setback has caused heated discussions domestically. People in academia, think tanks and the finance industry are concerned about China’s policy directions, not only in its recent dealings with the US about trade but also the overall trend over the past few years. There are increasing voices that China’s gain from the reform and opening-up policies of the past 40 years were because China has become integrated into a global economic system run by the US and its allies.
It is inappropriate, or at least premature, to send signals, intentionally or not, that China is about to build a new system to replace the existing one. China is still far from prepared for an economic confrontation with the US because China is much more dependent on US demand than the other way round, and it would only hurt itself if it were to take a hardline stance. Instead, China should be more focused on its own development and reforming the domestic economy.
More at https://www.scmp.com/comment/insight-opinion/united-states/article/2158963/china-should-cut-its-losses-trade-war
Russian PM Medvedev warns US against sanctions red line
Russia’s prime minister sternly warned the United States today against ramping up sanctions, saying that Moscow will retaliate with economic, political and unspecified "other” means.
The tough message from Dmitry Medvedev marked what the Kremlin sees as a red line, reflecting a growing dismay with the new U.S. sanctions that already has sent the Russian ruble plummeting to its lowest level in two years.
The U.S. State Department said Wednesday that Washington made the determination this week that Moscow had used the Novichok nerve agent to poison ex-Russian spy Sergei Skripal and his daughter in the British city of Salisbury and that sanctions would follow later this month. Russia has strongly denied involvement in the poisoning.
According to the State Department, those sanctions will include the presumed denial of export licenses for Russia to purchase many items with national security implications.
New sanctions proposals in U.S. Congress include legislation targeting Russia’s state-controlled banks and freezing their operations in dollars — a move that would deal a heavy blow to the Russian economy.
Medvedev warned the U.S. that such a move would cross a red line.
"If something like a ban on bank operations or currency use follows, it will amount to a declaration of economic war,” he said. "And it will warrant a response with economic means, political means and, if necessary, other means. Our American friends should understand that.”
More at http://www.thestandard.com.hk/breaking-news.php?id=112008&story_id=112008&d_str=20180810&sid=6
Now we all know that Trump is the devil incarnate.
It’s a no brainer that China will implode if they choose to go down this path. They simply have too many problems at hand.
So Emperor Winnie Xi's dragon throne is showing signs of cracking.........well at least we know that SCMP reporter will probably be abducted and placed in front of a firing squad.