Behind the US tariffs on 16 billion dollars’ worth of Chinese products

Note: The following is an edited translation of a commentary from the Chinese-language "Commentaries on International Affairs."

Following on from the 25 percent tariff on 34 billion dollars’ worth of Chinese products exported to the United States from July 6th, the US Trade Representative’s Office announced on August 7th that it would add a 25 percent tariff on a further 16 billion dollars of Chinese products, to be implemented formally on August 23rd. A spokesman for the Chinese Ministry of Commerce, speaking on Wednesday evening, stated that the US side was using domestic laws to override international law, which was a very unreasonable practice. In order to safeguard its legitimate rights and interests and the multilateral trading system, China is obliged to take necessary counter-measures and has opted to impose a 25 percent tariff on 16 billion dollars’ worth of US imports, to be implemented in parallel with the US.

The Chinese response is concise, rational and calm. It can be seen that after more than four months of confrontation, China has become acquainted with the US side's blackmailing means. Rather than be surprised by the US’s constant pressure, China was well prepared. In the face of the US practice of continuously escalating the trade war, China has adopted the principle that "I don't want to fight, I am not afraid to fight, I will fight if necessary." The firm action taken by China is intended to further deepen reform and opening up, and do well in its own affairs. Such a policy speaks for itself. 

One reason given for the US engaging in a trade war is "American national security", so as to help the manufacturing return to the United States, and create more jobs for Americans, but the consequences are actually quite surprising.

Two ships are loading goods for export at a container terminal of Lianyungang Port, east China's Jiangsu Province on August 8, 2018. [Photo: VCG]

Take the list of 16 billion dollars’ worth of Chinese exports to the United States as an example. The Office of the US Trade Representative recently held a hearing on whether or not to impose tariffs. A total of 82 delegates from the US chemical, electronics, and photovoltaic industries spoke up. They expressed a general concern that increased tariffs would raise costs to enterprises, resulting in the loss of jobs, ultimately damaging the US economy, reducing the competitiveness of US industries, and even forcing some small and medium-sized enterprises to close. In the end, only 6 of the representatives agreed to the imposition of tariffs, accounting for 7 percent of the total.

Faced with such a disparity, as well as the widespread opposition of American companies and industry associations, the US government still made the decision to impose tariffs on Chinese products worth 16 billion US dollars, which beggars belief. It would appear, that such a hearing in the trade war is merely a statutory process, and overwhelming objections can be vetoed by a small number of policy makers.

For U.S. government officials, the imposition of additional tariffs is not only aimed at restraining China’s development and achieving the “America First” goal, but is driven by other considerations. The New York Times has reported that since May, the U.S. Commerce Department has received 20,000 applications from companies requesting exemptions from steel tariffs for their products, but not one of them has been granted. Two of America’s biggest steel manufacturers have also successfully helped the government object to hundreds of requests by American companies that buy foreign steel to exempt themselves from the metal tariffs, claiming that the tariffs are safeguarding national security and boosting domestic steel production.

The report pointed out that several top officials of U.S. President Donald Trump’s administration have deep ties to the steel industry. For instance, Commerce Secretary Wilber Ross bought and operated several steel companies, which he later sold at a profit. The U.S. Trade Representative Robert Lighthizer represented United States Steel and other steel manufacturers in private practice as a lawyer. America’s second largest steel manufacturer Nucor once spent one million U.S. dollars to fund “Death by China”, a documentary made by Peter Navarro, who’s now the director of the White House National Trade Council.

Will imposing additional tariffs really safeguard U.S. national security? U.S. government officials may still feel unsure, but one thing they are certain of is that imposing additional tariffs will benefit themselves. Under such consideration, they turn a blind eye to the suffering of U.S. enterprises and consumers.

In recent days there has been a succession of bad news stories in the U.S.

Element Electronics announced on August 6th that it would shut down its plant in South Carolina and lay off 126 people from a work force of 134. The firm blamed tariffs on Chinese imports, especially additional tariffs on the main components of TV sets, for its decision, as tariffs had increased their costs. The Peterson Institute for International Economics estimated that as many as 195,000 U.S. workers could lose their jobs over the next three years if the U.S.’s 25 percent tariffs on car imports worldwide take effect. If other countries retaliate and tax similar products, 624,000 U.S. jobs could be lost.

A study by the Federal Reserve Bank of Atlanta on August 7th suggested that tariffs prompted almost one fifth of U.S. businesses to review, postpone or cancel their capital spending plans. The study noted that currently negative effects brought by trade frictions to U.S. business investment mainly focused on the manufacturing sector, but the effects could easily grow if tensions escalate.

Due to trade frictions, milk from the United States, a product that is highly dependent upon the overseas market, has seen its price fall to 15 US dollars per 100 lbs. A dairy farmer Sarah Lloyd from the Midwest of Wisconsin told the media that their family had a dairy farm with a history of some 100 years, which now sees a loss of 30 thousand US dollars every month. She said if they couldn’t see light at the end of the tunnel soon, she couldn’t imagine milking cows next year.

The domestic consumer goods market of the United States, from Coca-Cola to recreational vehicles, from toys to clothing, is undergoing a wave of price hikes under the shadow of the so-called US national security. Right after the US side declared its decision to impose the 25% tariff on Chinese imports worth 16 billion US dollars, some American internet users have rightly pointed out that this would mean a rise of 25% of the cost for American consumers, a burden that would fall disproportionally on low-income families as they have a higher exposure to Chinese consumer products. The US government is using tariffs as a big stick, which is injurious not only to the country itself, but also the people, for whose wellbeing they claimed to be working. 

In the face of increasingly vociferous opposition to the imposition of tariffs, might the US government actually do something to comply with the will of the people?