The U.S. export of soybeans to China has dropped by over 70 percent. (Courtesy photo)

The U.S. export of soybeans to China has dropped by over 70 percent. (Courtesy photo)

Reading the logic behind the tariffs and trade war

By Wang Donghua

With the trade tension between China and the U.S. further escalating, more and more comments have been made, with conflicting views on the tariffs imposed or trade war. It appears that the logic behind some comments is confusing. I would like to share my reading of the logic.

Some people have argued that China pays the higher tariffs and the U.S. federal government has collected a great deal of revenues out of the tariffs imposed. Anybody with some common sense knows that it is the importers that pay the tariffs on goods or services they import from other countries, however high or low the tariffs may be. In other words, China does not pay any tariffs, including those imposed since last year, for the goods it exports to the U.S., and the burden of the higher tariffs will have to be shared by the local consumers in the U.S. There is no denying that the federal government has collected some revenue, but from the local consumers who have paid higher costs arising from higher tariffs. The tariffs imposed have inflicted enormous pains, which are increasingly felt among consumers, farmers, producers and industries in the U.S. It is reported that hundreds of farmers have gone bankrupt as a result of tariffs and the number of bankruptcies is expected to rise. The truth is that the more tariffs imposed, the more pains felt, and the more cost paid.

Some people are obsessed with the illusion that a better trade deal could be struck for the US by means of maximum pressure, including tariffs imposed constantly. The fact is that the U.S. market share in China is not expanding but decreasing, because the tariffs have inevitably invited retaliation in kind, making the US products such as commercial aircraft, soybeans, corn, meat and seafood less competitive. Sometimes, short term measures could have long term impacts. The U.S. export of soybeans to China has dropped by over 70 percent and its market share has been taken by other countries. Some U.S. farmers are not exaggerating when they voice the fear that they may lose their market in China forever because of the tariffs. As the largest external market for Boeing aircraft, China has not put any single order with Boeing Commercial since tariffs imposed last year. It signed a contract with France instead on purchasing 300 airbuses last March when it saw no chance for the trade war to come to an end any time soon. This means great loss of benefits and job opportunities on the U.S. side. I am not sure this is the deal the US side hopes to have.

Some people are addicted to the attempts to curb China’s development by decoupling our two economies. As the top two economies in the world, China and the U.S. are closely intertwined to the extent not seen before, and complementary to each other in their pursuit of economic development. One’s move to hurt the other will eventually backfire or hurt oneself, and decoupling their economies will end up with both losers, a consequence that is hard to handle. The US needs external markets for greater development, and China has an expanding market to offer with a population of nearly 1.4 billion. There is huge potential for our cooperation and unlimited room for win-win results. History and facts show cooperation benefits both and confrontation hurts both. Only by working together, can we both grow stronger, and respond better to the common challenges arising from the increasing uncertainties across the globe. One will not get stronger by resorting to suppression on the other, and the key to one’s economic success lies in the improving of its ability and competitiveness.

Lastly, I have my logic to share. Those who advance the interests of our two peoples are the friends of our two peoples. The sound development of our bilateral relations serves the best interests of our two peoples. Those committed to promoting sound development of our bilateral relations are the friends of our two peoples. In other words, we are opposed to any move to hurt the interests of our two peoples. Any move to sabotage our bilateral relations will undermine the interests of our two peoples. We should reject any attempt detrimental to the interests of our two peoples. It cannot be simpler.

Wang Donghua is consul general of the People’s Republic of China to San Francisco.

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