Trump ignites in the trade dispute with China to the next level. Beijing has, however, a good chance that the economic damage will remain manageable. The key is a dynamic middle class, writes Frank Sieren.
Donald Trump has made good on his threat, and the full amount of punitive tariffs on Chinese imports to the value of 200 billion US-dollars exhausted. Next Monday you should enter with a duty rate of ten per cent, in strength. Together with the already imposed special duties on Goods to the value of $ 50 billion, half of all imports from China with extra duties assigned. It should not come to an agreement, increases the rate of customs duty as from January 2019 to even 25 percent. A further increase to a value of 267 billion reserves the right to Trump for the case that Beijing’s retaliatory tariffs targeting the US industry as well as agriculture attacks.
China is also a large market for U.S. agriculture
But Beijing keeps unmoved, has already announced to counter with a five – to ten-percent tariffs on U.S. Goods to the value of 60 billion dollars. The total value of affected U.S. export goods would then amount to $ 110 billion. China’s game room in the customs arm wrestling, however, is limited, because the United States run a total of only Were for 130 billion dollars to China.
China has other response options
However, there are other ways for Beijing to Washington to oppose something. The Chinese could be targeted by American companies targeted for the China long been the most important market. Kentucky Fried Chicken, for example, has risen, with over 5000 stores to the country’s largest fast-food chain. Or Starbucks, the need to close business in the USA, but in China, every day a new one opens up. Shanghai alone has twice as many Starbucks outlets as New York. Also, McDonald’s plans to double the number of its Restaurants in China. With limited procurement in state-owned media, forced to customer boycotts, or advanced controls can cripple Beijing, such a victory trains. This is what happened in the spring of 2017, as the Chinese authorities, branches of the South Korean group Lotte niches mixing due to allegedly inadequate fire safety short-hand close. Shortly before that, Lotte had made a company site in South Korea for the stationing of a U.S. missile defense system. Also the tourism sector was brought about by a word of Power from above to a Standstill. The Beijing tourism Department stopped a group traveling to South Korea. The Shopping district of the capital Seoul remained in the high season, empty.
DW-columnist Frank Sieren
With export restrictions in Beijing could the US also targeted supply chains blow up. Many American companies depend on Chinese suppliers, in order to keep the production costs low. Some US firms and interest groups have already launched campaigns against Trumps protectionism. The Tech companies Dell, Cisco, Juniper Networks and Hewlett-Packard tried to move Trump with an open letter to relent. His duties caused a “far-reaching, unreasonable economic harm to the US interests”. The American customers would have to pay higher prices for products from China. In the worst case, you lose even their jobs.
Negotiations ferrule more
In fact, the inches pain achieved on both sides now have a level, the negotiations clamp always does. Last week, Washington, Beijing had been invited to new talks to the 20. Around September should start. That’s what it comes to is unlikely. You are not going to negotiate “with a gun to the chest”, according to Chinese government circles. A de-escalation would have been able to have the U.S. President several months ago, but since he was Liu He, a close Confidant of President Xi Jinping in the field of economy, emergence, he said, the negotiations achieved successes null and void.
In doing so, China would have been even willing to buy more in the United States, and reduce the trade deficit. However, the Trump was not enough. With his diplomatic Brutal methods and his rhetorical duplicity Trump makes it Beijing’s increasingly difficult for him to accommodate and protect at the same time, the face. “We have enough fuel for our economy – even if the trade war drags on longer,” writes the state-run China Daily instead of combative. And that’s probably not a Bluff.
Consequences of the customs dispute for China is not
On the other hand, the trade from the pearls to the dispute, of course, not just of China’s economy, especially as it comes to a head in a difficult Phase of China’s transformation. The profits of China’s industry for the third month in a row due to lower consumer spending, rising credit defaults and higher financing costs, slow grown. At the same time, Beijing must still hold debt, rising real estate prices, industrial Overcapacity and environmental pollution under control – however, the economy suffers growth including representing the greatest legitimacy for the Communist party.
China’s car buyers are holding back currently
Chinese consumer goods producers observe that their customers always order more in Malaysia or Vietnam, where wages are now lower than in China. Also, the car sales fell in China in August for the second Time in a row, and decreased by 3.8 percent to 2.1 million vehicles. The consumer to push obvious of your purchases. That’s for sure. Nevertheless, the Chinese government sets out that the consumer keep the Chinese economy Running. The internal market is growing rapidly. The expenditure for consumption have contributed to the past year, 58.8 percent of the total growth in the first quarter of 2018, 77.8 percent.
The middle layer stabilizes the domestic demand
Around 400 million of the 1.4 billion inhabitants of China are today to the middle class. McKinsey predicts that in 2022 the middle class already belong to 76 percent of the Chinese urban population, more than 550 million people. It must not be forgotten: Even in the smaller cities of China, where Rents and real estate prices to be a burden on less of the purse and the number of inhabitants is still more than a million inhabitants, standard of living and propensity to consume continuously. There’s a lot of air is still to the top. This Trend can also stifle the punitive tariffs. Partial disadvantages of the punitive duties is to cope with the middle class easily, if not reason, then out of Patriotism. In the Chinese agree: Trump has attacked China economically and unfairly treated – and not Vice versa, as Trump claims. His “greed” triggered the trade dispute and not about unfair market conditions, as attested also in Brussels, Beijing, China.
The state of the press ensures, daily, that, in this respect, no doubt. This is not too difficult, because Trump succeeds, a deep economic crisis in China to trigger. The losses caused by the punitive tariffs are likely to self-represent in the case of customs duties of 25 percent, only about 0.3 to 0.5 percentage points. There are many indications that Trump keeps the threat anyway, only up to the Midterm elections in early November in an upright position. His intransigence toward China is, for many voters this is reason enough to give him their voice. Much longer Trump must not wait but. With time, the disadvantages for the American economy are greater than the benefits. The notice of their constituents and are not infinitely loyal, if Trump delivers.
Our columnist Frank Sieren has lived for more than 20 years in Beijing.