Impact of the Trump presidency on China, trade
As a presidential candidate, Donald Trump was critical of international trade agreements – and China in particular – for taking manufacturing jobs away from Americans. He talked of erecting trade barriers (singling out steel and aluminium imports for immediate action), and of imposing tariffs of 45 per cent on Chinese imports, even though US law limits his ability to do this.
His aggressive tone on trade played well with his constituency, as did constant reminders of the trade imbalance between the two countries – China exports about four times more goods to the US than it imports from the US.
This may have just been campaign rhetoric. Let’s hope so, as I don’t believe “getting tough” with China, and drawing back from the rest of the world in general, will help America.
The net benefits of free trade and globalisation are well documented, while many of the manufacturing industries that left the US for China years ago have already moved on to countries with lower production costs. If Mr Trump were serious about trying to ring-fence American jobs, he would need to act against many more countries than just China.
Of course, China could retaliate by disrupting the supply chains of US-based multinationals – such as Apple, Boeing, Ford and General Motors, to name just a few – thereby blocking exports of crucial materials or components and forcing up prices. But this is unlikely to happen as such a tit-for-tat reaction would damage China’s global reputation as a reliable supplier, and cause long-term damage to international trade, which already has enough challenges to overcome.
So far the language from Beijing since the election has been conciliatory, congratulating Mr Trump on his election win and talking of the need for the two countries to continue their mutually-beneficial trade relationship and grow global trade.
Even if common sense loses out and a trade war between the world’s two biggest economies takes place, there are still potential advantages for Beijing in a Trump presidency. For one, it seems certain he will pull the plug on the Trans-Pacific Partnership (TPP), the trade deal promoted by President Obama and involving around a dozen countries (but not China) that would have challenged Beijing’s growing economic leadership in Asia.
Chinese-led alternatives to the TPP, the Regional Comprehensive Economic Partnership and the Free Trade Area of the Asia-Pacific, now assume greater importance.
And longer term, if the US under President Trump withdraws from much of the world, Beijing’s path to economic leadership in many regions will become a lot easier.
