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Global Times

China ready for prolonged US trade war

Global Times

By Chen Qingqing and Wang Cong Source:Global Times Published: 2019/5/8 23:13:40

Nation's resilience, policy incentives to help weather rift

After US officials threatened to escalate its trade war with China, rattling global financial markets and angering some US businesses, there is a distinctive, palpable level of calmness in China. Many in the foreign press gushed about how calm China was over the latest threats from US officials.

The US will raise tariffs from 10 percent to 25 percent on $200 billion worth of Chinese imports effective Friday, according to a notice posted on the Federal Register's website on Wednesday.

"China deeply regrets the announcement. If the US goes ahead with these tariff hikes, the Chinese side will have to take necessary countermeasures," China's Ministry of Commerce said in a statement issued late Wednesday.

But interviews with Chinese businesses and analysts on Wednesday showed that behind the calmness is overwhelming confidence in the business world and other sectors in the country that China is prepared to fight a protracted trade battle with the US, if necessary, and that China is better positioned than the US to cope with the consequences.

In Dongguan, a major manufacturing hub in South China's Guangdong Province, which is also considered the "world's factory," manufacturers and exporters said that after a year of dealing with the tariffs war, they are fully prepared for a further escalation.

At the invitation of the US side, Vice Premier Liu He will travel to Washington from Thursday to Friday, kicking off the 11th round of trade negotiations with his US counterparts, Geng Shuang, spokesperson of Chinese Foreign Ministry, told a press briefing on Wednesday.

Overwhelming confidence

"Though the pressure exists, I'm confident in the business outlook," CH Kwok, general manager of Dongguan LC Technology Co which exports millions of dollars worth of toys and electronics a year to the US for companies such as Kid Galaxy and Mattel, told the Global Times on Wednesday.

Kwok argued that if the US continues to increase tariffs on Chinese products, US importers and retailers, and eventually consumers, will bear the brunt because they will not be able to find alternative sources to import certain products without paying higher prices, at least in the short term.

"It will be difficult for US firms to find replacements, because a mature supply chain cannot be fostered overnight," he said, noting that though some factories have shifted their production lines to countries such as Bangladesh and Vietnam, they still rely on China for certain materials, which then would raise costs.

Underscoring the US market's heavy reliance on Chinese products, the latest Chinese customs data showed on Wednesday that despite facing heavy duties, Chinese exports to the US declined only 4.8 percent year-on-year in yuan terms in the first four months of the year, compared to a 26.8 percent drop in imports from the US.

China's trade surplus with the US, one of the main grievances of the US administration against China, expanded 10.5 percent to 570.2 billion yuan ($84.17 billion) during the period, according to data from the General Administration of Customs.

Contrary to what US officials claimed, US consumers will be the ones chipping in for the additional costs not Chinese factories. "American consumers are already beginning to see higher prices on certain products, and the impact will only worsen if a deal is not reached and tariffs increase even further," Jonathan Gold, vice president of supply chain and customs policy of National Retail Federation of the US, told the Global Times in an earlier interview via e-mail.

If the US proceeds with the additional $325 billion in goods, that means consumer products and daily necessities such as clothing, toys, shoes, furniture and electronics could be subject to more tariffs, CNBC reported on Tuesday.

Even if the US administration is willing to further increase tariffs at a cost to its consumers, Chinese companies are also prepared to deal with that.

Jason Ye, general manager of Dongguan Yimei Houseware Co, said that as his company sees fewer orders from the US, his company and other businesses in the region were exploring other markets like Europe.

"If the disputes further escalate, we'll consider giving up the US market due to thinner profits," Ye said, noting that exports to the US only account for 10 percent of his company's total orders, which means there will be little impact on the overall business.

Stronger hand

The calmness in China also stood in stark contrast to the fallout of the threats in the US, where farmers and business groups warned of dire consequences and urged the US government to immediately resolve the issue.

Describing the tariffs as the "worst case" for US soybean growers, Davie Stephens, president of the American Soybean Association, said in a statement Tuesday, "We need a positive resolution of this ongoing tariffs dispute, not further escalation of tensions."

In a strange turn of events, even as US business groups voice strong opposition, US Senate minority leader Chuck Schumer, who has opposed US President Donald Trump on almost all issues, offered support, urging Trump to "hang tough on China."

"Compared to the US, China has a more united stance, as Washington officials could not overcome their differences and missed the best negotiation opportunities," said Cao Heping, a professor of economics at Peking University.

He said that since no one has an edge in terms of size of the economy, it's about which side has more diversified and effective policies to stave off external pressure and uncertainties.

"China would have the upper hand," he said, pointing to unity and confidence in Chinese society to take on the US after a year of ups and downs, the Chinese economy's resilience and mature policies to boost growth.

Following a slew of measures, from massive stimulus packages to tax and fee cuts, the Chinese economy saw a better-than-expected performance so far this year, with improvements in consumption and investment, two of the main growth drivers.

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