The implications of US-China trade war
18 September 2109
In the aftermath of the global financial crisis ten years ago, the leaders of the world’s major powers pledged that never again would they go down the road of protectionism which had such disastrous consequences in the 1930s—deepening the Great Depression and contributing to the outbreak of world war in 1939.
Yesterday US President Donald Trump announced tariffs on $200 billion worth of Chinese goods in what the Washington Post described as “one of the most severe economic restrictions ever imposed by a US president.”
A levy of 10 percent will be imposed starting from September 24 and will be escalated to 25 percent in 2019 if the US does not receive what it considers to be a satisfactory agreement. The new tariffs, which will cover more than 1000 goods, come on top of the 25 percent tariff already imposed on $50 billion worth of industrial products. Trump has threatened further measures on the remaining Chinese exports to the US totalling more than $250 billion.
China has threatened retaliatory action including tariffs and other, as yet unspecified measures, against the US, meaning that the world’s number one and number two economies are locked into a rapidly escalating trade war that will have global consequences.
Announcing the decision, Trump called on China to take “swift action” to end what he called its “unfair trade practices” and expressed the hope that the trade conflict would be resolved.
But there is little prospect of such an outcome because, while the US is demanding that the trade deficit with China be reduced, the conflict does not merely centre on that issue. China has made offers to increase its imports from the US, all of which have been rejected. The key US demand is that the…