There are two months left until Donald Trump I return to the Oval Office and the noise between United States and China. Through the press, embassies and the Government, it has responded to the duty that the imminent president announced this week, the first in a saga that in Chinese opinion will lead to a destructive war for everyone. They are warnings in a didactic tone, sprinkled with some reproaches and inflamed promises to defend free trade, but the decibels will rise with Trump’s broadsides.
“There will be no winners in a tariff war. If the United States continues to politicize economic and trade issues and use tariffs as weapons, no one will be left unscathed,” predicts an editorial in the pro-government China Daily. And American companies and consumers “will pay the highest price for the exorbitant tariffs approved by their own government.” The Chinese embassy in Washington had already alluded the day before to the absence of winners and recalled that “economic and commercial cooperation between China and the United States benefits both.”
It is a thought shared by the majority of economists. China will find it difficult to meet its medium-term goals and will have to allocate more fiscal stimulus to mitigate the foreseeable decline in its exports. The American consumer will see the cost of living rise when he is already dealing with worrying inflation.
Trump will tax an additional 10% on all Chinese imports and will apply 25% tariffs to Mexican and Canadian imports since his first day in the office. The reason, he clarified, is Beijing’s lukewarmness against the fentanyl that causes havoc in their country. Trump is annoyed that China does not execute drug traffickers. “The United States should strengthen drug prescription control and spend more on advertising about the harms of drug abuse to reduce demand instead of looking for scapegoats abroad,” China Daily recommends. He calls Trump’s excuse “nonsense” and claims that no country has notified China of the discovery of a single stash of fentanyl since it tightened control in 2019.
Songs to free trade
These days, excited songs of free trade can be heard from various tribunes. The latest has come from Vice President Han Zhong and neither the forum nor the audience is irrelevant: the International Supply Chain Expo taking place these days in Beijing with Tim Cook, CEO of Apple, and other American businessmen understandably concerned about what is coming. “The world has entered a period of confusion and change, and the fragmentation of the global economy has intensified,” Han warned. China, he added, will double its efforts to protect supply chains and work with all countries to create a multilateral world and an open economic system. Cook has always vigorously defended China and emphasized that its attraction is not its salaries, much higher than in the developing world, but its density of engineers and agile logistics.
Trump’s latest tariff threat has dragged down Asian stock markets today. The Taiwanese has dropped 1.5%; the South Korean, 0.8%; and the Japanese, more than 1%. It is no coincidence that the automotive sector has been the most punished. The yuan reached its lowest price against the dollar in the last four months in a movement that anticipates difficult times. Beijing devalued its currency by 5% after the first round of tariffs in Trump’s previous term.
The task is piling up for China, as busy arming itself against the next administration as it is dealing with the current one. Yesterday, Beijing described the sanctions approved against 29 Chinese companies for using cotton from Xinjiang as “unfounded bullying.” In that province, Washington denounces that the Uighur minority ethnic group is subjected to forced labor, accusations stubbornly denied by China.
