US Tariffs Punch on China: Retaliation on cards

China has come out strongly against the cutting US confrontation on trade with China as Trump administration imposed tariffs on $60 billion in goods from China which severely cripples the freedom of China to invest in US technology industry. The Chinese government threatened to hit $3 billion in tariffs with US goods.

China in an embittered tone stated that the Trump administration has set a very bad precedent which exemplifies unilateralism and extreme protectionism. Commerce Ministry of China stated that China is ready for any challenge and is although not in favour of any trade war but will not hesitate to fight one. The Trump announcement which was based on the biased treatment meted out to US firms on Chinese soils, pushed stocks to a six-week low. Trump has suitably directed the Robert E. Lighthizer to announce tariff increases in next 15 days which will compensate the country for lost jobs and also profits.

The Commerce Ministry of China gave first signals of reciprocal steps in form of a list of 120 items which were worth $1 billion and included fresh fruits, wine on which the tariffs will be increased to 15 percent. The department also stated that it was planning a 25 percent tariff on goods like pork and aluminium which will be imposed after a suitable evaluation of the effect of US tariffs on China.

Trump administration has placed all cards to disrupt years of engagement with China to get better leverage and win a better bargain for US businesses and people. There is a broad consensus in the US over the Chinese violations of US intellectual property rights and other restrictions on licensing. The global supply chains, American businesses operating China, consumers all seem to await the Chinese retaliation towards the US as it is a big punch on China’s trade and credibility.

It was in 1995 when the US had resorted to such protectionist approach over its Intellectual Property against China in 1995.  China had then acceded to US demands. US cannot put the same pressure today as China’s economy is 17 times stronger than before and thus reasonably less vulnerable to US pressure. Any US-China trade war will have an effect on 40 percent of global trade a potential case for mounting unease in Wall Street. Trump administration has accused China of a loss of more than 6 million jobs and 60,000 businesses in addition to the huge trade deficit of $375 billion.

The tariffs although aimed at China will have a negative impact on American consumers as mostly household items stand affected. Vice-President Mike Pence stated that the US era of economic surrender is over.

 

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