In what is being called an “unusually swift response” to President Trump’s latest $200 billion tariffs imposed on Chinese goods – which wouldn’t go into effect until at least September – on Monday China filed a formal complaint with the World Trade Organization only one week after Trump’s latest move.
As president Trump is attempting to use his infamous negotiating skills, China has decided to use their own with a new twist as they attempt to rally support among international leaders, which up until now, has had little success.
Because the U.S. imports more Chinese goods than China imports U.S. goods this means “it will run out of U.S. imports for penalty tariffs before Washington does.” China has $80 billion in penalty tariffs left after their retaliatory tariffs to Trump’s earlier $34 billion tariffs imposed over “complaints Beijing steals or pressures companies to hand over technology,” but has instead chosen to go directly to WTO with a formal complaint, notes Beijing AP News.
“We are unable to fight equally,” said Tu Xingquan, director of the China Institute for WTO Studies at the University of International Business and Economics in Beijing.
Monday’s move “indicates that we value the role of the WTO rules,” said Tu.
Tu goes on to say, “there might be some adjustment in China’s approach to countermeasures,…” leaving economists and business groups to speculate adjustments could also include pressures on American businesses in China after a spokesman for their Commerce Ministry said last week, “Beijing hoped they [American businesses] would lobby Washington to protect their own interests.”
Business Insider reported, “Trump joins a long list of presidents” dating back to President Lyndon B Johnson “who have attempted to use trade restrictions to boost US domestic metal producers” but that “studies show that these types of moves typically result in a small boost for the industries and serious negative consequences for the broader US economy.”
The last two presidents both played tariff war games with China and it didn’t end well, especially for US workers losing their jobs, according Yahoo! Finance.
In March 2002, President George W. Bush imposed a 30% tariff on Chinese steel. The results were chaotic. In a report [pdf] put out by Consuming Industries Trade Action Coalition in February of that year, the coalition found the tariffs against China boosted the overall prices of steel and cost the U.S. 200,000 jobs in businesses that buy steel, representing $4 billion.
In another recent situation, in September 2009, President Obama imposed a three-year tariff on car tires from China. Chinese imports went down, but the tires were simply sourced from other countries, the LA Times noted. According to the Peterson Institute for International Economics, 1,200 tire jobs were saved in the U.S., but through costs passed along to American consumers, 2,500 jobs were lost indirectly.
Why this matters:
China plays the long game. They have been trying to emerge as a major player on the global trade partner’s markets for the better part of two decades, as evidenced by their currency now being added to the SDR (Special Drawing Rights) basket.
By China going to the internationally recognized WTO arbiters so quickly to ‘officially’ challenge Trump’s latest move while Trump goes outside the organization to impose his latest tariffs, has, at the very least, the symbolic effect of further legitimizing China’s desired place as the ‘team’ player while Trump diminishes the United State’s role as the top team player to one who isn’t.
China’s attempts to rally support up until now wasn’t having much success, but after Trump’s performance at the recent NATO, now topped off by the Putin, summits, China may now be in an even better position to gather stronger international support and the trading alliances they desire knocking the U.S. out of the game all together to play alone.
U. S Trade Rep Robert Lighthizer said on Monday, that the United states it filing five separate trade disputes against, China, the EU, Canada, Mexico, and Turkey with the WTO, challenging trade partners’ retaliatory tariffs.
In a press release Lighthizer said, “The actions taken by the President are wholly legitimate and fully justified as a matter of U.S. law and international trade rules.”
Lighthizer added, “Instead of working with us to address a common problem, some of our trading partners have elected to respond with retaliatory tariffs designed to punish American workers, farmers and companies,” continuing he said, “These tariffs appear to breach each WTO Member’s commitments under the WTO Agreement.”
The Hill lays out a timeline of the back and forth tariffs between the Trump Administration and the five nation states the WH is filing their WTO complaints against for their retaliation which began with the Trump Administration’s 25% steel and 10% aluminum tariffs imports into the U.S.