There's a general panic in many circles across America over the looming "trade war" with China. I've already written today about the real nature of the dispute, but it's also worth adding some other points regarding the progress of the trade disputes as well. Remember the history: President Trump announced tariffs on steel and aluminum. Then China put announce $3 billion in tariffs on a few American products. Next the USA announced about $50 billion in tariffs on Chinese goods in response to Chinese theft of US intellectual property. China responded a few days ago by announcing its own $50 billion in tariffs on US goods. Now President Trump has directed that the government come up with another $100 billion in tariffs on Chinese goods. The ball is in China's court.
This history is important because, as the Wall Street Journal points out today, China is now facing a problem: there aren't all that many other American products that the Chinese let be imported into China which will make it easy to come up with a corresponding $100 billion tariff hit. This is the trade deficit in US/China trade coming home to roost. China can't put tariffs on products that the Chinese already don't import. In a sense, this demonstrates the truth of President Trump's statement of a few weeks ago that a trade war with China would be easy to win.
The Chinese can retaliate in other ways. For example, China now controls roughly 95% of the world production of rare earth elements. These are needed in many high tech and defense products. China could put export restrictions on these materials or could raise the price on international sales. That is a strategy that might hit the USA in the short run, but in the longer term it could result in sources of these materials being developed in the West, a move that would undermine the Chinese monopoly. We will have to wait and see China's next move.
This history is important because, as the Wall Street Journal points out today, China is now facing a problem: there aren't all that many other American products that the Chinese let be imported into China which will make it easy to come up with a corresponding $100 billion tariff hit. This is the trade deficit in US/China trade coming home to roost. China can't put tariffs on products that the Chinese already don't import. In a sense, this demonstrates the truth of President Trump's statement of a few weeks ago that a trade war with China would be easy to win.
The Chinese can retaliate in other ways. For example, China now controls roughly 95% of the world production of rare earth elements. These are needed in many high tech and defense products. China could put export restrictions on these materials or could raise the price on international sales. That is a strategy that might hit the USA in the short run, but in the longer term it could result in sources of these materials being developed in the West, a move that would undermine the Chinese monopoly. We will have to wait and see China's next move.
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