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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2734

US China Trade War: has China started circumventing the blow?

Hemantha Abeywardena writes from London…

Unlike his predecessors, President Trump seems to believe in the power of flexing the economic muzzle, when it comes to forcing the nations that do not toe the line set out by the US on a range of issues. Mexico is the latest country that backed down rather than threatening in kind, knowing very well that the consequences may be grave in the long run.

With the US at the centre, the trade disputes are mushrooming across the globe that may eventually lead to tariff wars. India, Japan South Korea, Germany, Mexico and Turkey are also on President Trump’s radar, despite being the traditional US allies.

It’s the trade war between the US and China – the world’s two biggest economies – that worries the world, as it shows no sign of abating. On the contrary, it can escalate further with the tariff covering almost everything that comes from China to the US, if President Trump doesn’t get his way.

The uncertainty has already taken its toll on many sectors; it may slowly get worse unless a deal is struck.

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Since the trade deficit between the US and China is overwhelmingly in China’s favour at present, China cannot match the tariff by the US on the goods from the latter, despite some US farmers being on the firing line. The speed at which the US targeted Huawei, the Chine telecom giant that is at the centre of a spying row, just shows how the trade war can take ugly turns unless sanity break out in the arena of geopolitics.

So far China has been careful not to target American tech giants directly. Even in a worst-case scenario, it is inconceivable that China picks on Apple and the likes in the hope of hurting the US.

However, that doesn’t mean that China has gone into a passive mode. On the contrary, some subtle moves are underway: for instance, China has recently warned its students and academics about certain issues that potentially could hamper their stay in the US; China also looks at the possibility of controlling the export of rare earth minerals to the US, an important element in the development of contemporary electronic gadgets.

In short, China is constantly exploring the every feasible way to hit back the US or minimize the impact on it.
It looks like that China has found a way to circumvent the tariffs - at last; it has let its currency, yuan, slide in order to offset the tariffs. With that China hopes that the US consumers do not have to bear the brunt of the impact of increased tariffs.

On Saturday, Steven Mnuchin, the US Trade Secretary, accused China of the manipulation of the currency to boost its exports. “It’s not coincidental in my mind that the currency has moved from approximately 6.30 [yuan to the US dollar] to 6.90,” said Mr Mnuchin in Japan, while referring to the ongoing trade disputes with China.

President Trump has not reacted so far to what his Trade Secretary was referring to – in a late night tweet. If confirmed, the US may take the tariff war to a new level as China does not seem to back down at this stage.
It’s not good news as far as global economy is concerned, because there are signs that the 10-year- unfortunate cycle may haunt us once again as it did in 2008, perhaps next year.

- Asian Tribune -

US China Trade War: has China started circumventing the blow?
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