China’s revenge against US tariffs

China’s revenge against US tariffs

After Trump imposed tariffs on steel and aluminum, China did not get angry. Actually, got even.

Article by Oso Oseguera.

“A number of Chinese steel mills, transporters, and traders have actually given up on the US market as an export destination,” said Shanghai-based Linda Lin, editor of the China Steel Service at consulting firm CRU reported to CNBC.

Chinese firms have proven that they can make good products for less. Consumer prices for televisions, adjusted for quality, fell by more than 90% in the 15 years after China joined the World Trade Organisation (WTO).

China’s share of global exports has risen to 14%, the highest any country has reached since America in 1968. That may fall as China loses its grip on low-value industries such as textiles. But it is gaining a new reputation in high tech. If data are the new oil, China’s tech industry has vast reserves in the information generated by the hundreds of millions of its people online—unprotected by privacy rules. Whether you make cars in Germany, semiconductors in America or robots in Japan, the chances are that in future some of your fiercest rivals will be Chinese.

The US is the world’s largest steel importer, relying on shipments from more than 100 countries and territories. Details regarding the tariffs were not presented, and it’s unclear if certain trade partners will receive preferential treatment. During the meeting, though, Trump did single out China.

For the Chinese steel manufacturers, however, the news was inconsequential. Although China is the world’s largest steel exporter, it is only the 11th largest source country to the US, accounting for just 2% of total US imports last year.

Given this low base, “we think this is a negative for the world steel industry as a whole, but as for China, we don’t think it can be any worse,” Lin said.

China’s response to Trump bore the hallmarks of a carefully calibrated warning. Beijing signaled its readiness to go toe-to-toe with US President’s campaign of tariffs against China, proposing new levies on 128 American imports that heightened market fears of a looming trade war between the world’s largest economies. Beijing said it was planning tariffs on about $3bn in imports, including a 15% tariff on US steel pipes, fresh fruit and wine, and a 25% tariff on pork and recycled aluminum.

As Sahi Yinhong, an international relations professor at Renmin University in Beijing, said to the Financial Times: “If the revenge is too soft, it might raise the complaints of Chinese people and be unable to stop Trump’s trade war targeted at China. If the revenge is too strong, then it might seriously hurt China’s economy and it might take Trump impose more trade sanctions, which would start a trade war”.

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