THE war has begun. The US fired the first shot and China responded. No bullets. No bombs. No missiles. The US-China trade war is about levying tariffs on goods and services imported and entering into each other’s domestic market. Tariffs serve as a defense mechanism of a nation to restrict imports by raising their prices, dissuading domestic consumers from buying.
While on the campaign trail in 2016, then presidential candidate Donald Trump accused China of unfair practices and described its membership in the World Trade Organization as a scheme towards committing the “greatest jobs theft in history.”
What started as wholesale imposition of tariffs (not only on China) by the US on washing machines, solar panels, steel and aluminum imports in the first quarter of 2018, had China retaliating by imposing tariffs of up to 25 percent on 128 US products on April 2, 2018. From thereon, the volleys of levies between the two countries escalated. Effective Sept. 1, 2019, the US will have levied tariffs on every import from China.
Trump re-ignited Sinophobia in the US with the threat of China overtaking the former as the world’s top economy. A report by the Standard Chartered Bank, surveying the countries’ purchasing power parity (PPP) exchange rates and nominal GDP, says this will happen in 2020, as the US will be relegated to the number two spot. Anti-Chinese sentiment in the US first arose when Chinese workers were hired to build the First Transcontinental Railroad in the mid-1800s. It reached a point when the US Congress passed the Chinese Exclusion Act of 1882, to stop immigration, as well as, naturalization.
Fast forward to July 15, 1971, President Richard Nixon announced that he would make a state visit to the People’s Republic of China, with which the US had no diplomatic relations since the Communist Party rose to power. From Feb. 21 to 28, 1972, Nixon visited China, met Chairman Mao Zedong and opened a new era that led to the symbiotic trade relationship between the two countries. For some time, China became the manufacturing hub for US products that supplied both the US and Chinese markets. But through the years, China learned the ropes in creating, manufacturing and marketing products that can compete with US-branded ones.
Trump may have bought his ticket for re-election by picking on China. That does not mean better lives for the average American, as there is no country that can fill the gap left open by Made-in-China products. On the other hand, China’s growing middle class will be re-directed to buying locally manufactured products whose quality is as good as American brands. Of course, it is not that simple. Both the US and China public will suffer from this non-shooting war, with collateral damage to the rest of the world. In war, nobody really wins.