On July 6, China and the United States launched their first trade war, paying $34 billion in tariffs and fighting back $34 billion. The United States to launch a trade war with China, however, only a few hours later, the U.S. trade representative office in Beijing time at 3 o ‘clock in the morning of July 7, announced a new policy: those who are affected by a trade war imports from China of American companies, can have 90 days to apply to the U.S. government is valid for 1 year “tariff exemption.
What does it mean to have a White House policy like this in the first hours of a trade war? Lack of preparation for a trade war? Back off? Or is there another reason? What’s the next $200 billion trump claims?
In my opinion, this official statement from the us trade representative sends three signals:
First, the governing style of the trump administration should be pragmatic after it has once again exposed the massive blackmail of the trump administration.
About 60 percent of the $34 billion in goods at the start of the trade war were made by foreign companies, with the U.S. accounting for the majority. That is to say, the trump of the tariffs on China, not just China is hurt, us companies even more so, because the United States of these goods is mainly by these foreign companies to make profits. Now, the trump administration has a policy of not wanting to hurt U.S. companies, or hurt its own popularity, right after the start of a trade war.
The White House this behaviour may be considered to be the trump ill-prepared for a trade war, but in my opinion, this is not the case, this isn’t the trump unprepared, this itself is the trump technique. Mr Trump can do three things with this:
1. Shock and awe all countries, including China.
If according to trump the trade war to remove all the companies involved the United States, the U.S. trade deficit with China narrowed substantially immediately, and correct the foundation of Chinese logic will trump shaken, so the initial trump is certainly not on China’s exports to the us is the enterprise or enterprise division in China. And if U.S. companies exported to the United States out of goods, the import and export trade scale contrast digital gap between China and the United States is not so big, of course, not a deterrent to include China and other countries.
As many people believe, China exports more than $400 billion to the United States, the United States exports more than $100 billion to China, and China exports so much more to the United States than the United States does to China. Before they hit, they thought China couldn’t beat them, and that’s what Mr Trump wants. Imagine, once a large number of American enterprises export to the United States, where can such an effect?
But, in fact, many so-called Chinese exports the United States more than $four thousand and U.S. exports to China more than $one thousand is wrong, etc., is a trade war can’t dozen of speech itself is not right, temporarily not to say there are a large number of enterprise products, this is actually a trade war is after tax influence on related trade in goods, not entirely in size. In terms of the size of the tax, 20 percent on $50 billion and 40 percent on $25 billion are the same magnitude. As for the actual effect on trade, tax rates are only one aspect of the effect. If necessary and there is no substitute for a product, the price you have to buy, such as the world most of the mobile phone is made in China, the us tax can only pass the cost on to consumers, for will not change this pattern. As for products like those that can be replaced, consumers will abandon them if prices rise a little. So, how much does the tax affect, in fact, has to do with the competitiveness of the product itself, and the price is only one of the factors that affects the competitiveness.
Trump make size is, in fact, the shock and awe all countries, including China, and all the people, to angrily to blackmail, otherwise everyone don’t believe it make big trump, blackmail and how to play this?
Get domestic companies to demand the White House, which will ensure support for Mr. Trump.
After the trade war to fight, trump the release of such policies, like the White House out of thin air suddenly grasped the power in life and death for some companies, can force the enterprises to tax exemption and turn to the White House. That would make the situation better for Mr Trump in November’s mid-term elections.
The White House statement, for example, said that companies could continue to apply for exemptions within 14 days of filing. If there are opponents, they can raise their objections in an additional seven days. This means that if companies don’t listen to trump, they will be taken measures. If they listen to trump, they will be exempt from tariffs.
3. Confuse the opponent and gradually lose the will to fight.
Mr Trump’s ability to blackmail and beguile his opponents is also a means. Because, when trump to come up with a larger number, then according to need a little decrease, relax vigilance may rival the meeting at this time, that trump is ready to ease the situation, then suddenly the heavier taxation, disrupt the rhythm of the opponent, make opponent lose gradually will continue to fight.
Second, the tempo of Mr Trump’s trade war has been exposed.
Will Mr Trump’s trade war be fast? In my opinion, the pace of trump’s trade war will not be completely fixed, but will be based on his needs. But on the whole, considering the trump’s purpose is to blackmail and the wider political purpose, he take the strategy is to play a gun to see the reaction and then play it by ear, hit after a gun according to the reaction to find opponents weaknesses and gaps, and then pointed to.
In the face of this tempo, we actually have to maintain enough strategic focus. You hit me and I hit me back. Anyway, you get 34 billion dollars and I get 34 billion dollars. But it’s not about us what you’re pulling out of a trade war, it’s not about us.
In this way, so that it is not cheap to pick up, but each time a loss, that is another touch. And, no matter how the pace of change in the United States is, in my view, we will maintain an attitude of counterattack and open channels of negotiation, so that there will be no gaps in China’s response.
Third, Mr Trump is likely to continue to escalate trade wars.
Although gave us companies trump derate tariff, but this does not calculate to China, it is not to China, it’s just a trump based on their own political interests and the needs of American economic interests adjustment, has nothing to do with China. From the fact that both China and the United States have fired substantive shots, we can see that if there is no substantial opportunity, the possibility of a further escalation of trade war is still high. At least another $16 billion will remain in effect. When it takes effect, Mr Trump is likely to make further policy adjustments based on actual results and what he wants to achieve.
As for an increase of $200 billion, that’s not necessarily true, because the Numbers are so large that the process of internal consensus is long. What’s more, mo said $200 billion, the $100 billion that trump had previously said didn’t materialize.
However, no matter what the attitude, in view of the “made in China 2025” plan is impossible to change for the time being, the trade representative office in the White House statement can be exempted from tariff is one of the conditions of “the product is related to China industry planning has important strategic significance, such as’ 2025 ‘made in China” to decide whether to give the three aspects of “immunity”. To put it bluntly, if these products are involved in the “made in China 2025 plan”, they will probably not be exempt from the tariff.
For this trade war, it seems to me that every Chinese should be prepared for a protracted war. In short, we should see who has more endurance and who can carry it. China’s shoulder at the same time, is because of China’s domestic market demand and bring a lot of innovation opportunities, so everything for China should improve the occasion, the trade war into the steps of the growth and expansion in China, let us after a few years for his reckless regret!