US President, Trump increased with new punitive tariffs, the pressure on China. This is not going to bring a lot of and, ultimately, the United States more damage than China, says Economist Shen Ling in the DW-interview.
Deutsche Welle: US President, Trump has, with effect from 24. September new punitive tariffs imposed on Chinese imports to the value of 200 billion US dollars. How strongly do you see China affected?
Shen Ling: The new measure is no great Surprise, because of the trade conflict between China and the United States unfolding for some time, and in Washington, we discussed also about for a long time. Trump, as we know him, is to enforce the punitive tariffs on each case, even if there is resistance in the American population.
Overall, the punitive tariffs on Chinese Goods to the value of $ 200 billion too much impact on China. Finally, the tariff is just at ten percent. Since then, it in March, it became clear that the US and China could lead to a trade war that has seen the Chinese Yuan depreciated by about ten percent. Technically, the damage will be mitigated by the punitive tariffs actually.
What the Chinese economy is more and more influenced, are psychological factors. Here, Trump knows his “art of business” very well. The repeated threats and announcements have a lot of duties stronger negative impact on the economy than the actual criminal. This shows itself mainly on the Chinese stock exchange, the pessimistic mood has already had a negative impact.
Economist Shen Ling: China’s stock exchanges are still the most vulnerable by Trumps punitive tariffs
The negotiations between Beijing and Washington are broken. Will return the two sides to start a dialogue?
I am convinced that the negotiations will be continued. Trump is pursuing a strategy that we had initially not expected. He goes by the Motto: If I do not proceed with the massive threats against China, I can only achieve very limited results in the negotiations. That is, the right willingness to negotiate, he has not shown maybe, but his threats increased, and waiting to see if China makes from concessions.
Is Trumps reaction with punitive tariffs on the trade deficit in a comprehensible manner?
It is known that China has a huge trade surplus with the United States. In total, China exports Goods to the value of approximately 500 billion to America, but the imports amounted in contrast, only about 230 billion dollars. From an economic point of view, the punitive tariffs against China, but not necessarily for the Benefit of the United States. For consumer goods from China, there are on the American market, hardly any Alternatives. There are no third-party countries, which could replace in this area of China. Under the punitive tariffs against China, especially the American consumer will suffer. Trump is fixated on the trade deficit, but a negative balance of trade need not necessarily have a negative impact on the United States.
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Washington requires Beijing to adapt its economic policy, for example, the reduction of state subsidies for private enterprises and better protection of intellectual property. China will make corresponding Commitments or concessions?
That would be my proposal for the Chinese government. Demands for more market economy or a better protection of intellectual property rights is not contrary to Chinese interests. China should not make it to trial, because these steps would not harm us, but ultimately good. The Chinese government must, of course, between long-term and short-term interests of a Balance, and as a result, it may be between real progress and the expectation of the Western countries there is a discrepancy.
With which output is expected in the trade war between China and the United States?
I think this will pull in the length. At the Moment, the American economy is relatively good, so that Trump can count on with great support, no matter what he does. He’s been around for more than a year, the US President, and in the meantime, many advisers were against Trumps economic policy had to vacate the Post. From this we can see that Trump is not going to change his opinion about the trade deficit, and other topics.
But for China punitive tariffs of 25 percent would not necessarily be a serious blow, because the decisive factor is whether and how many Alternatives there are to the Chinese exports. The solution takes time. Maybe the Americans have, after a few years, a new President, then the economy policy is different. The Chinese government, and the private investors will not understand, with time, slowly, that the trade war means the end of the world. Many friends of mine, make trading transactions, have told me that they have earned this year due to the devaluation of the Yuan quite well. The nervousness due to an escalating trade war will set in over time.
Shen Ling is an economist and has a PhD in Bonn. He currently works as assistant Professor at the Business School of East China University of Science and Technology in Shanghai
Employees: Yuhan Zhu