After Donald Trump announced a new round of tariffs at the rate of 25% covering $50 billion worth of Chinese imports to the US, China announced parallel tariffs targeting $50 billion worth of American goods, including from the US agricultural industry which relies on China’s literally hungry market for a substantial portion of its foreign profits. Chinese officials have repeatedly stated that they prefer free trade to tariff regimes but when left with little choice but to retaliate against US economic provocations, they will of course proportionally strike back.
While the timing of Trump’s new barrage of tariffs against Beijing was chosen to coincide with the largely successful Singapore summit held between the US President and the Supreme Leader of the DPRK, in the broader sense, Trump’s timing could not have been worse. China has long stated that 2018 will be the beginning of a long planned opening up of China’s market to new foreign imports across multiple sectors, from basic goods to investment capital. As part of President Xi Jinping’s goal of transforming China from a production superpower to an innovation and entrepreneurial superpower that will metamorphose “Made in China” to “Created in China”, Beijing’s confidence in its ability to lead the world in innovation has meant that Chinese consumers will now be able to shop the wider world for everyday goods as well as luxury imports more easily than every before.
Furthermore, as part of the drive to fully eliminate what remains of rural poverty as part of the push towards a Moderately Prosperous Society, Xi also intends to further lower tariffs as a means of creating trade equilibrium between China and its new economic partners who can benefit from exporting low cost/everyday goods into China.
Today’s announcement was reported in China’s official news outlet Xinhua as follows,
“In response to domestic consumption upgrades and an economic shift to quality, China supports the imports of daily consumer goods, medicine, and equipment for rehabilitation and old-age care, according to the meeting. More measures are in the pipelines to lower tariffs, optimize import customs clearance, and clear up unreasonable management measures and fees.
The move represents China’s latest efforts to further open up its economy, as the country embraces the 40th anniversary of the reform and open-up drive, the first and foremost factor behind its economic success story.
The government has announced multiple new policies to further liberalize domestic sectors and bring in more foreign products since the beginning of the year.
Effective on July 1, the average tariff rate for clothing, shoes and hats, kitchenware, and sports and fitness supplies will be reduced from 15.9 percent to 7.1 percent, and that for home appliances such as washing machines and refrigerators from 20.5 percent to 8 percent. The tariff rates for other products including aquatic products, processed food, detergents, cosmetics, and some medicine will also be reduced substantially.
Import taxes on vehicles and auto parts will also see marked reduction on the same day to upgrade the auto industry”.
The statement continues,
“China has been striving to reduce tariffs. More than 8,000 types of imported goods now enjoy duty-free policies, based on free trade agreements with 23 countries and regions”.
Taken in totality this means that both low cost exports from developing nations and luxury items from the so-called first world will be able to enter the vast and increasingly affluent Chinese domestic market with more ease. As China clearly demonstrated during the first round of Trump’s trade war with Beijing, Chinese policy markers are just as willing to open the door to US imports as they are in respect of imports from other nations. While Trump has a special disdain for the Chinese goods that US businesses have come to rely on in ever greater numbers, this attitude of suspicion is not matched by China which is now ready to accept the freer flow of US goods at historically high levels.
While today’s announcement about a further opening up of China’s markets is part of a strategy which dates back to a time when no one thought Donald Trump would ever become US President, it cannot be denied that the detailed nature of the multilingual press reports from China are at least partly designed to force Trump to think twice about the fact that in forcing China’s hand in instigating retaliatory tariffs, that Trump is missing the opportunity of a lifetime. Just as China’s doors are becoming more open than ever to a wide variety of imports, Trump is sticking his foot in a door that his typical friends in the US business sector would otherwise race towards.
The long dated and always simplistic stereotype of China being a low-wage/low-quality master of mass-production has long been discredited by the forward thinking planning of Chinese officials. Today even low skilled Chinese industrial workers have higher salaries than those in most of south and south east Asia, much of Latin America and parts of eastern Europe. Furthermore, as China embraces new cutting edge technology while working to transform ‘brand China’ into a moniker for high quality, long lasting goods, just as Japan did in the 1980s, the old stereotypes about both China’s internal business strategy and the nature of Chinese goods are being shattered.
However, unlike Japan which remains something of a closed market to finished goods from foreign nations, China’s strategy is one of opening up markets to fill the gaps created by China’s pivot from a mass producer of low cost goods to a leading quality producer and cutting edge innovator. This will help China to develop a more economically symbiotic relationships with all of its partners and this could have easily and from China’s perspective, happily included the US as was proved just a month ago.
Instead, Trump’s short term thinking and outdated impressions of China which have guided US trade policy are cutting off not just American agricultural producers from the Chinese market but also luxury American brands and US finished goods from the world’s largest consumer base.
It seems that when it comes to scoring points against China, the only goal Trump has scored is an own-goal.