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The world was misled not only by the American pollsters but also by the fiction that the world has come to regard as a fact - the American values. The most cherished of these so-called values for Americans is said to be equality, egalitarianism along with openness and honesty. There is, however, no mention of bigotry, racism, misogyny, intolerance, profanity and religious discrimination in this long list of self-proclaimed American values. That is why perhaps the world thought the US voters would reject the man who had made liberal use of these negatives while campaigning for the US presidency. He had turned the campaign into a dirty mud-slinging match. And he is said to have indulged liberally in misstatements.
Trump had then blamed China, Mexico and many other such countries for the United States' woes and, as president, he said he planned to curtail trade that is a major source of these countries' economies. His aggressive rhetoric against China on the campaign trail was well publicized the world over. He had hinted that he would slap heavy duties on imports from China so as to promote domestic manufacturing which went abroad looking for cheap labor and economically priced utilities.
It did take some time for Trump to redesign the global business model to shift it from the one dictated by globalization to the one that would be based on the principle of 'America first'.
It is never a good policy for those living in the so-called Third World to believe everything that the US and European media say about what China is up to. Most of such reports are usually based on half-truths and usually built around fake news.
But it certainly is a good policy to closely follow these reports depicting China as the 'bad guy' challenging the so-called 'rules of the liberal, post-war institutional order' that the 'good guys' have built. Shorn of angles and slants, such stories do give a clue to the real purpose behind the propaganda.
The US tariff measures has led to a decrease in the volume of China's export to the US, which fell by 9.7 percent year-on-year in the first four months of 2019, dropping for five months in a row. In addition, as China had to impose tariffs as a countermeasure to US tariff hikes, US exports to China have dropped for eight months in a row.
Direct investment by Chinese companies in the US was US$5.79 billion in 2018, down by 10 percent year-on-year. In 2018, paid-in US investment in China was US$2.69 billion, up by only 1.5 percent year-on-year, compared with an increase of 11 percent in 2017.
With the outlook for China-US trade friction unclear, the WTO has lowered its forecast for global trade growth in 2019 from 3.7 percent to 2.6 percent.
In today's globalized world, the Chinese and American economies are highly integrated and together constitute an entire industrial chain. The two economies are bound in a union that is mutually beneficial and win-win in nature. Equating a trade deficit to being taken advantage of is an error. The restrictive measures the US has imposed on China are not good for China or the US, and still worse for the rest of the world.
The trade protectionist measures taken by the US go against the WTO rules, damage the multilateral trading system, seriously disrupt global industrial chains and supply chains, undermine market confidence, and pose a serious challenge to global economic recovery and a major threat to the trend of economic globalization.
With the shadow of the international financial crisis still lingering over the global economy, the US government has escalated economic and trade friction and hiked additional tariffs, provoking corresponding measures by the countries involved. This disrupts global economic and trade order, dampens world economic recovery, and undermines the development of companies and the well-being of people in all countries, plunging the world economy into the "recession trap".
In 2018, the US was China's largest trading partner and export market, and the sixth largest source of imports. The same year China was the largest trading partner of the US, its third largest export market, and its largest source of imports. China is the key export market for US airplanes, soybeans, automobiles, integrated circuits and cotton.
Trade in services between China and the US is flourishing and highly complementary. The two countries have conducted extensive, in-depth, and mutually-beneficial cooperation in tourism, culture, and intellectual property. China is the largest destination for US tourists in the Asia-Pacific and the US is the largest overseas destination for Chinese students.
By the end of 2018 accumulative Chinese business direct investment in the US exceeded US$73.17 billion. The rapid growth of Chinese business investment in the US has contributed to local economic growth, job creation, and tax revenues. The paid-in investment by the US in China was US$85.19 billion by the end of 2018. In 2017, the total annual sales revenues of US-invested companies in China were US$700 billion, with profits exceeding US$50 billion.
Therefore, if trade in goods and services as well as two-way investment are taken into account, China-US trade and economic relations are mutually beneficial, rather than the US "being taken advantage of".
Starting from early July 2018, in three steps, the US imposed additional tariffs of 25 percent on Chinese exports worth US$50 billion, and additional tariffs of 10 percent on US$200 billion of Chinese exports. In addition, the US threatened further tariffs on all remaining Chinese exports, leading to quick escalation of the economic and trade friction between the two countries. China responded in kind and raised tariffs on imports worth US$110 billion from the US. On May 13 the US announced that it had launched procedures to slap additional tariffs on remaining Chinese goods, which are worth around US$300 billion.
The ongoing Sino-US trade war is contributing to global economic uncertainty, according to the World Trade Organization. The WTO's Director General Roberto Azevêdo says there has been a seven-fold rise in tariffs imposed across the globe in just one year. And growth in world trade has almost halved since 2016.
The United Nations Conference on Trade and Development estimates more than 80% of the trade hit by US and Chinese tariffs will be picked up by other countries - with the EU set to make the biggest gains.
US president Donald Trump argues the tariffs will bring in $325 billion to the US Treasury while protecting US firms from unfair competition. But UNCTAD warns that tariffs are ineffective at protecting domestic firms. And in the long run US-China bilateral trade will decline and be replaced by trade originating in other countries.
China in its white paper released on June 2, 2019 has listed three 'red lines,' positions the United States had taken in the trade talks that were unacceptable: First, that it would keep tariffs in place for a period after the proposed trade agreement was signed. Second, that it could impose punitive tariffs if it judged China to be in violation of the agreement, and that China would be forbidden from retaliating with its own tariffs. Third, the ever-inflating expectations of the terms under which Beijing would buy American goods under a proposed bilateral purchasing agreement.
Economic analysts, meanwhile, have been calculating the impact of a full-blown trade war, estimating a loss of about 1.2 percentage points to Chinese GDP growth. This figure is now portrayed in the Chinese media as entirely manageable given China's capacity to use fiscal and monetary policy stimulus to support domestic demand and keep growth above 6 percent.
Even if a trade deal with the United States is still possible, some in the Chinese leadership are now starting to ask, why bother? They argue that in technology, investment, foreign policy, national security and human rights, the Trump administration has made it clear that it has embarked on a more adversarial position toward China. So why should Beijing expend any more political capital on a trade deal? Perhaps it's better, in China's view, to cut its losses now and get ready for the next Cold War.
If that's what the Trump administration wants, its strategy has been a great success. If not, and the US president really wants a trade deal, with reasonable decreases in the bilateral trade deficit, and some substantive changes in Chinese economic behavior, the American negotiating strategy requires some serious recalibration.
The bottom line is that nationalism is not just a factor in Trump's America. It's now a big factor in Xi Jinping's China as well, reinforced through the prism of Chinese history. In most of its dealings with America over the last 100 years, China has seen itself as weak. Today, in Beijing's view, China is weak no longer.

Copyright Business Recorder, 2019


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