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USA vs China: Is a storm coming?

The US-China trade dispute has subsided, but its climax lies ahead

The reciprocal exchange of customs-duty strikes between Washington and Beijing for some time subsided. Moreover, America and the Celestial Empire have tried to demonstrate both the determination to fight and the willingness to agree on a mutual solution to trade collisions. Each of the parties in its own way demonstrated a good will for concessions, although a few days before it played out the firmness of the will and the desire to go to the victorious end.

USA vs China: Is a storm coming?

Alexander Isayev

Leading researcher, Deputy Head of the Center for the Study and Forecasting of Russian-Chinese Relations, IFES RAS
China imposed a ban on exports to North Korea on 32 type of materials, technologies and dual-use equipment. That is, those that can be used in civil and military fields. In the US, they were satisfied with the news about this. Simultaneously, the media reported timid reports that the PRC was studying the possibility of the devaluation of the yuan. Americans have long been striving for this, believing that this should affect Chinese exports to the United States.

In response, US President Donald Trump said that both countries will necessarily agree in the trade sphere, as well as in the field of intellectual rights. At the same time he referred to the excellent relations with the Chairman of the People's Republic of China Xi Jinping, which will allow them to agree. A whole detachment of American banking and financial experts made speeches unanimously that the trade battle between the two countries will lead to nothing good, but it will negatively affect the economic situation in the world. Therefore, it is better to transfer the dispute to a non-public negotiating plane.

But how promising and uncompromising it all began. Trade discussions escalated in early April, when tariff increases on Chinese aluminum and steel products were followed by mutual threats. On April 3, the US administration announced a list of products from China, on which it is planned to impose additional 25 percent duties. The Chinese did not remain in debt and immediately published their lists of 106 items, on which they will impose 25 percent duties and which will come into force after the introduction of planned duties by the Americans on Chinese goods. The Americans threatened with a list of 1000 products - the Chinese responded by showing their list and said they were ready for a trade war.  

On this, Beijing did not stop, and through the Ministry of Commerce, the PRC initiated proceedings in the World Trade Organization (WTO) "against unilateral US actions" with regard to steel products from the PRC and aluminum products.

Such a rapid Chinese counterattack is respected. Russian steel and aluminum fell under the additional customs duties of Americans a little earlier than Chinese ones. But only two weeks later, from the Russian Ministry of Industry and Trade, unsure statements were heard that in Moscow they are studying the possibility of an appeal to the WTO.

"Decisive" actions of China impressed the public, including the Russian one. But in fact the increased duties on steel and aluminum goods from China - the only practical action. All the rest is just mutual "list" threats. And Washington's waving of lists is more like a probe of possible actions by the Chinese on American actions. This is also an attempt to determine the limit to which the leadership of the Celestial Empire can go. As a result, the situation became clear to the Americans, as, indeed, the Chinese. None of them wanted to quarrel, and they decided to negotiate.

Yes, and the most collision, which was hastily called the trade war, was simply the launching of paper pigeons with printed lists of goods, the purchase of which both sides could mutually limit.

However, it was initially clear that China will not aggravate economic relations with the United States to the point of no return, and it is understandable why. After all, we are talking about the hundreds of billions of dollars that China urgently needs to continue the reforms. Americans do not have a reason to quarrel with the Chinese against the backdrop of extremely dangerous tension with Russia. And since both sides demonstrated their "determination" and remained with their own. Moreover, the Chinese very quickly promised to increase the purchase and reduce duties on foreign cars and other goods, for which Trump publicly and personally thanked Xi Jinping.

Nevertheless, Beijing continues to act decisively, powerfully, and most importantly - it reacts extremely quickly. The latter, by the way, is not at all in the character of the Chinese, who at first all are thoroughly examined and weighed, and only then they react.

It seems that the Americans did not really expect such pressure from the usually restrained Chinese. Right after his president, US Treasury Secretary Stephen Mnuchin in an interview with CBS stressed that Washington will continue talks with China on trade issues, as well as on reducing its high trade deficit with the Middle Kingdom. Again, like his boss, he turned to the statement of Trump's wonderful relationship with Xi Jinping.

Surprisingly, against this background, there were craftsmen in Russia who believed that with the aggravation of trade and economic relations between the United States and China, Russian-Chinese economic ties would go uphill. But this does not happen. The Russian market today takes just as much as China can afford, and sells China as much as the Chinese are interested in.

The rhetoric in the bilateral trade dispute between the United States and the PRC is increasing or weakening. At the same time, the Chinese behave more wisely than the Americans. The US actively voiced propaganda and ideological theses about "China's economic aggression in the world," "trade expansion," which seemed to be more characteristic of communist and ideologically hardened China, but not for a democratic and pluralistic America that tries to persuade the rest of the world, that she never resorts to propaganda flaws in international life.

The Chinese proved to be more resistant to the attacks of the Americans and proceeded to actions that could be described as "compelling peace in a trade war". For the first time, Americans have faced a partner in their entire history who, just as skillfully as they themselves, can use economic threats and practical levers to counter the enemy's unprofitable shares. China studied business with America. And, it seems, one of the postulates of Confucianism that the student has surpassed the teacher comes true.

You can accuse China of economic expansion anyway, but in the acquired ability to use economic measures of influence on the enemy, you can not deny it. Americans will have to try hard to find workarounds for influencing Beijing, which does not want to submit. Although the compromise was demonstrated by both sides.

But all the same questions remained, and to search for answers to these questions will have to Beijing and Washington.
After the exchange of "list slaps" and the onset of another lull in the trade shootout, analysts from both sides started calculating potential losses. Let us turn to the Chinese countermeasures. China, for example, is ready to risk buying US soy, a popular food product in Asia, whose strategic supplier to the People's Republic of China is the Americans. 

The introduction of increased duty on soybeans will lead to a catastrophic effect for American suppliers of the product on the Chinese market. President of the American Soybean Association John Heydorffer believes that the 25-percent duty on import of American soybeans to China will lead to devastating consequences for every farmer engaged in soybean cultivation in America.
Moreover, among foreign and foreign analysts there is an opinion that the Chinese commodity counternotes affect exactly those states where Trump had the broadest support when he went to the presidency. If the "list battles" developed into a real trade war, Trump would have problems with his voters, whom he would hardly want to lose if he intended to run for a second presidential term.

Beijing also has something to lose, and he will try to prevent this. As a result of the 2017 year, the trade turnover between the two countries amounted to almost $ 600 billion. At the same time, the balance of payments in favor of China reached a record level of $ 274 billion. But this is not all. Last November, during the visit of Trump, trade agreements were signed for the amount of almost $ 235 billion. China wanted to buy 300 American Boeing, as well as build a liquefied gas plant in Alaska together with the US. Refusing all this is not in the interests of either Washington or Beijing. 

It is also interesting how skillfully the Chinese began to handle the counting of money in a trade dispute with the United States. They are ready to beat the patient - for economic gain. For the first package of American measures worth $ 50 billion, they responded in a mirror manner, at the same time, when the Americans announced the existence of a package "weighing $ 100 billion," the Chinese hinted that their answer might even be stronger than the American one.

It should be added that today China, despite the dramatic dramatic developments in East Asia, connected with the problem of the DPRK's nuclear weapons, is in a more favorable position. America is tightly engaged in confrontation with Russia and the situation in the Middle East, where it does not want to lose its influence, strengthened after the collapse of the Soviet Union. To create one more care in the form of an open trade war with the PRC, Washington is not in any hurry. Overseas, it seems, decided that the time had not come yet, and limited ourselves to the fact that Trump had indicated his "determined" intentions to resist the Chinese "economic aggression". But at the same time he managed to confirm and personal friendship with the chairman of the PRC. Straightforward and primitive? Yes. But it is externally effective. 

In any case, the Americans will continue to seek concessions from Beijing and reduce the US deficit in bilateral trade. The first act of the Sino-US trade drama took place and ended in a draw. However, the situation of uncertainty remained. There is also a foreboding that the culmination of the US-China trade and economic conflict is yet to come.
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