fbpx

China’s changing economy helps explain taming of Trump’s threats

United States President Donald J. Trump’s threats to punish China over trade have been displaced by a pledge to negotiate after hearing the perspective of his counterpart Xi Jinping. Below are five factors that may explain the change in tone.

The setting

A meeting with Xi at Mar-a-Lago created “tremendous goodwill and friendship”, Trump tweeted last Saturday. Commerce Secretary Wilbur Ross said the countries agreed to a “100-day plan” to discuss trade. The countries agreed to “properly” deal with trade friction, China’s Foreign Ministry said on its web site. Trump told reporters en route to the summit in Palm Beach the US has been treated “ unfairly” and has made “terrible trade deals” with China.

Less dependent

The world’s biggest exporter is becoming less dependent on external demand, as policy-makers promote consumption-driven growth.

At the broadest measure, 40 million people work in export-related sectors in China today, 7 percent of nonfarming employment, according to an estimate by UBS Group AG economists.

That’s dwarfed by the services sector, which accounted for 43.5 percent of total employment last year, up from 36.1 percent in 2012, according to the National Bureau of Statistics. The new economy accounted for about 70 percent of new jobs, it said.

Interconnected

Also the world’s second-largest importer, China is deeply connected with a number of nations. That means any US-led trade war would also hurt some of its closest allies.

China is the biggest export market for many economies. Taiwan, Malaysia, Korea, Vietnam and Singapore are among nations exposed to any turbulence in China caused by potential trade frictions, according to UBS.

The effects of aggressive US tariffs against China will ripple far beyond to countries including Germany and others in Europe through China’s domestic and foreign supply chains, according to an Oxford Economics note in February.

Blow back

A trade war would threaten complex mutual supply chain links with US electronics manufacturers.

China’s biggest export category to the US and other countries is electronic products, including cell phones and computers, according to UBS. The US is the most important supplier to China, according to Oxford Economics: “This illustrates the two-way nature of supply chains and suggests trade protection has the potential to come back to bite US producers.”

Apple, Boeing

A trade war would hurt a growing number of US multinationals eyeing China as a major engine for revenue growth.

Major US multinationals could be lobbyists for China, the Beijing-based Center for China and Globalization (CCG) wrote in a report in January. The US companies had been lobbying Congress to grant China most-favored-nation treatment every year before China joined the World Trade Organization in 2001, the CCG wrote.

Now China can still work together with those multinationals to push for a stable bilateral relationship, it said.

Do your worst

Even on a worst-case scenario, the effect on China’s economy would be manageable.

The most likely approach toward China from Trump will be case-by-case, sector-by-sector tariffs and the enhanced enforcement of US trade laws, according to UBS.

Even in a scenario in which the US imposes a 15-percent tariff on Chinese exports, that would only dent China’s GDP growth by 0.5 percent, UBS estimates. With China already pursuing a more moderate yearly growth target of “about 6.5 percent, or higher if possible,” the fall out from any tariffs if they were to come look manageable.

Those factors may help explain the confidence of Chinese officials in the days leading up to the US visit: “We don’t want a trade war,” Jiang Shan, former general Director of Americas and Oceanic Affairs at the Ministry of Commerce, said in an interview on March 31. “But we shouldn’t be afraid of any trade war.”

Total
0
Shares

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Previous Article

Trump’s problems are America’s–and the World’s

Next Article

Terror threatens to transform Sweden amid calls for unity

Related Posts

Read more

1,700 flights canceled, at least 2 dead as ice storm freezes US

AUSTIN, Texas—Winter weather brought ice to a wide swath of the United States on Tuesday, canceling more than 1,700 flights nationwide and snarling highways. At least two people died on slick roads in Texas and two law officers in the state were seriously injured, including a deputy who was pinned under a truck, authorities said.

Total
0
Share