(Source: Global Times, 2023-03-21)
On March 22, 2018, former US president Donald Trump signed a memorandum under the Section 301 to impose unilateral tariffs on Chinese goods and restrict investment, mergers and acquisitions by Chinese companies in the US, signaling the start of the largest trade war seen in human economic history. After President Joe Biden took office in January 2021, he followed the course set by the Trump administration with high tariffs on Chinese products. So far, this US-launched trade war has lasted for five whole years.
Over the past five years, the US government has witnessed its failure in an attempt to change the trade deficit with China through high tariffs. In 2017, before high tariffs were imposed, the US goods trade deficit with China stood at $375.2 billion, while the annual US goods trade deficit with China in 2022 was $382.9 billion. The restrictive measures have also failed to halt the booming trade volume. Despite the influence of the COVID-19 pandemic, total bilateral trade between China and the US still has risen from $635.2 billion in 2017 to $690.6 billion in 2022, hitting a record between the two countries. This is because bilateral economic ties between China and the US has its strong internal logic and are both vibrant and resilient. Washington should not be afraid of such trade relations: They are a natural outcome of the global division of labor and should have created more tangible benefits for people in both countries.
During the long-standing trade war, the US not only failed to achieve its intended objectives, but also created a range of adverse impacts that undermine its economy, China-US economic ties and global economy at large. As a result of high tariffs on China, US consumers have paid higher prices and reinforced the still-high inflation in the US indirectly. Statistics show that 92.4 percent of tariff increases are actually paid by US importers, and a study commissioned by the US-China Business Council and conducted by Oxford Economics found that price increases on imported consumer and intermediate goods detracted 0.5 percentage points from US GDP in 2018-2019 ($108 billion) and reduced real household income by $88 billion.
Owing to high tariffs, the economic and trade model between China and the US has inevitably changed, two-way direct investment has been suppressed, and some sectors have suffered unanticipated blows. The trade war with China has exacerbated the fragmentation and confrontation across the global economy, and the increasingly broken global economic system has further led to the higher cost of cross-border transactions and uncertainty for multinational companies. In other words, the high US tariffs on China have become an obstacle to the sound development of the global economy.
In the face of China's growing strength and influence in the post-World War II economy, the desire of the US to outcompete China is understandable to some extent. However, economic competition should be benign and, more importantly, have a bottom line. The outcome of competition should also be conducive to human progress. The essence and the appeal of the market economy lie in healthy competition based on rules. Unilateral high tariffs against China will have no other results than a lose-lose situation and damage to the global economy.
In terms of China-US relations, President Biden's Five-Noes commitment stresses that the US does not seek a new cold war with China. But let us be frank: The trade war that has lasted for five years, coupled with the constantly intensifying decoupling and blockade, not only contradicts the US' statement, but also is not what a great power should think and do. In other words, the US has the ambition to make itself great again; it also needs to have the magnanimity to tolerate the development of other countries. Containment and suppression will not make America great, let alone stop the pace of China's rejuvenation. The US-launched trade war with China has not continued to escalate because of the Phase One trade deal, but this is far from enough. We believe that courage and decisiveness are the necessary virtues of a politician. Whether from the real economic interests or the need to be responsible for the international economic system, please show political courage and make a decisive and wise strategic choice. This lose-lose trade war has been dragging on for five years and should have ended long ago.
This article was drafted by Song Guoyou, Professor and Deputy Director of the Center for American Studies at Fudan University.
