THE leaders of China and the United States had announced at the G-20 meeting in Osaka in late June that they had reached détente in their trade war. In September, after a summer of heated rhetoric, the Trump administration increased tariffs on another $125 billion worth of Chinese imports. China responded by issuing tariffs on an additional $75 billion worth of US goods.

The US may impose further tariffs in December, bringing the total value of Chinese goods subject to punitive tariffs to over half a trillion dollars, covering almost all Chinese imports. China’s retaliation is expected to cover 69 per cent of its imports from the US.

If all the threatened hikes are put in place, the average tariff rate on US imports of Chinese goods will rise to about 24 per cent, up from about three per cent two years ago, and that on Chinese imports of US goods will be at nearly 26 per cent, compared with China’s average tariff rate of 6.7 per cent for all other countries.

The numbers suggest that Washington is not winning this trade war. Although China’s economic growth has slowed, the tariffs have hit US consumers harder than Chinese consumers. With fears of a recession around the corner, Trump must reckon with the fact that his current approach is hurting the US economy. There are many reasons Chinese exports to the US have not fallen as much as the Trump administration hoped they would. One is that there are no good substitutes for many of the products the US imports from China.

Some export-oriented manufacturing is leaving China, but not for the United States. Sixty per cent of US companies said they would stay in China while about six per cent are returning home. The damage to the economy on the import side is even more pronounced for the US than for China.

In 2018, the tariffs did not compel Chinese exporters to reduce their prices; instead, the full cost of the tariffs hit American consumers. President Donald Trump needs to back away from his self-destructive policy towards China because his trade war is only bleeding the world’s economy.

Omar Shahkar
Islamabad

Published in Dawn, October 18th, 2019