U.S. slams China with more tariffs, which is running out of retaliation options

By Dan Calabrese

My theory all along on the Trump tariffs have been that they’re a hammer designed to force trade concessions. They’re not Trump’s preferred policy, but they’re the mechanism he thinks he needs to get other nations to negotiate more favorable trade deals. I’m not sure trade imbalances represent the economic problem the president thinks they represent, but it’s clearly a priority for him.

That being the case, he certainly seems determined to hammer China harder than any other country in the world. He must really want that better China trade deal!

Is he going to get it? The latest round of new tariffs on China have ratcheted up the trade war to the point where it’s almost impossible for China to retaliate in kind, simply because the Chinese don’t import enough goods from us to expand the tariffs such that they would match the ones Trump has imposed on them.

They’re making noises about finding other ways to get back at us, but they’re in a difficult spot, and Trump seems to know it:

The Trump administration’s announcement that it plans to clamp 10% tariffs on a further $200 billion in Chinese goods—from tech gear like routers to furniture and handbags—stoked anger and hand-wringing among Chinese officials on Wednesday. China doesn’t import enough from the U.S. to match Washington dollar for dollar as it has in previous rounds, so Beijing is reviewing plans to hit back in other ways, said Chinese officials familiar with the plans.

Measures being rolled out include holding up licenses for U.S. firms, delaying approval of mergers and acquisitions involving U.S. companies and ramping up inspections of American products at borders, the officials said. A Commerce Ministry statement on Wednesday described Beijing as “shocked” by the U.S. action and said China “has no choice but to take necessary countermeasures.” It didn’t elaborate.

Behind the scenes, however, officials described the mood as more cautious. Senior Chinese officials are weighing how far to press the retaliation without hurting other national interests, according to the officials. The retaliatory measures are the kind of nontariff barriers that U.S. and European businesses have long complained about, and Beijing is actively courting allies in Europe and elsewhere to fight what officials call U.S. “trade bullying.”

China also needs the U.S. for more than just trade. “The U.S. is not China’s enemy as both countries face many common challenges,” said one of the officials, listing climate change, terrorism and other problems. And the tariff battle threatens to sap an already weakening Chinese economy.

I wonder how much of this has to do with the fact that China never really imposes any serious pressure on North Korea. They protect Bowl Cut Jr. more than they keep him in line, and that’s made it difficult for the U.S. to get the Norks to commit to any real denuclearization.

But to the extent this is purely about bilateral trade, China realizes it can only go so far in raising the stakes with the U.S. precisely because we do buy so many of their goods, and it’s a huge economic benefit to them that we do.

I’ve said it before and I’ll say it again: Trade is not a winner/loser game in which the company exporting more “wins” and the company importing more “loses.” That is not how trade works, and I’m not sure President Trump understands that. International trade is simply a series of independent economic transactions between parties. One gets the goods he wants, the other gets the money he wants. If everyone agrees to the terms and everyone comes away happy, then there really are no losers.

Trump is convinced other nations are making it harder for U.S. companies to get goods into their countries for sale, and he believes that forcing these nations to renegotiate existing trade deals would represent an enormous economic benefit for the United States. He also thinks tariffs are the way to force them to renegotiate.

So far all he’s met with is retaliation and resentment, but that could be the precursor to progress. If it isn’t, consumers all over the world – including the United States – are going to find themselves paying a lot more for goods, no matter where they come from.

Dan writes Christian spiritual warfare novels and does all kinds of other weird things too. Follow all his activity by liking him on Facebook!