US President Donald Trump on Friday announced the US will impose a comprehensive set of trade tariffs on Chinese imports — estimated to amount to at least US$50billion — following an investigation by US government agency, Office of the United States Trade Representative (USTR) into intellectual property theft by China.
In addition to the imposition of 25 percent duties on targeted Chinese products, Trump also instructed US Treasury Secretary Steven Mnuchin to impose new investment restrictions to prevent Chinese companies from acquiring strategically important US technologies.
The investigation, which commenced in August last year, found China uses joint venture conditions, foreign investment restrictions, and administrative review and licensing processes to force or pressure technology transfers from American companies.
The USTR also found that China directs and facilitates investments and acquisitions which generate large-scale technology transfers and conducts and supports cyber intrusions into US computer networks to gain access to valuable business information.
Prior to the announcement, Wei Jianguo, executive deputy director of a Beijing think tank, China Center for International Economic Exchanges, used robust language: “If Trump really signs the order, it is a declaration of trade war with China.” Wei continued: “China is not afraid, nor will it dodge a trade war. We have plenty of measures with which to fight back, in areas of automobile imports, soybean, aircraft and chips. Trump should know this is a very bad idea, and there will be no winner, and that there will be no good outcome for either nation.”
Following the imposition of the tariffs, China unveiled reciprocal tariffs on approximately US$3billion of US imports ranging from pork, recycled aluminum, steel pipes, fruit and wine.
Photo courtesy of United States Information Agency /Wikimedia Commons
“The US declared a trade war, but China is acting quite restrained. The list that China has announced appears to be a retaliation, but still it is very measured,” said Li Yong, senior fellow of China Association of International Trade, quoted by Bloomberg. “The move sends a message that China is able to fight back, but we still want a trade peace instead of a trade war,” said Li.
(Edward Jones, Taipei Times)
The current US-China trade war is not the first time protectionist trade measures have been adopted by the US — but will it work and how could it affect the global economy?
Perhaps the most famous example of a trade war is the series of reciprocal protectionist trade policies which were adopted by many countries during the Great Depression of the 1930s. Following the Wall Street Crash of 1929, the US Senate passed the Tariff Act of 1930, commonly known as the Smoot–Hawley Tariff, which raised tariffs on over 20,000 imported goods. Other countries soon retaliated with boycotts of US goods and reciprocal tariffs against US products.
Although the tariff initially appeared to be a success, between 1929 to 1933 US exports decreased 61 percent from US$5.4billion to US$2.1billion and unemployment in the US jumped from 8 percent in 1930 to 16 percent in 1931, and reached 25 percent by 1933.
Meanwhile, US tariffs forced Canada, France and Britain to forge closer economic links which each other and develop new trading partners, while Germany pursued a system of autarky (economic self-sufficiency), resulting in an overall reduction in global trade.
However, economists disagree to what extent protectionism was responsible for worsening the Great Depression. US economist Paul Krugman has argued that the Tariff Act exacerbated the Great Depression by preventing a recovery in trade after production had recovered. However, another US economist, Milton Friedman, attributed the Great Depression to severe monetary contraction caused by a banking crisis and poor policy making by the Federal Reserve.
1. Why did US President Donald Trump decide to impose tariffs on Chinese goods? Was he justified in doing so?
2. Do you think it is possible that the US-China trade war could escalate out of control and cause a new Great Depression?
3. If you were the US president, would you have handled the situation any differently? If so, how?
(Edward Jones, Taipei Times)
1. tariff n.
2. intellectual property phr.
(zhi4 hui4 cai2 chan3)
3. joint venture phr.
(he2 zi1 qi4 ye4)
4. technology transfer phr.
(ji4 shu4 zhuan3 yi2)
5. trade war phr.
(mao4 yi4 zhan4)
6. retaliation n.
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