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Behind 'Trade War' Slogans, a Few Routes to Peace

Behind 'Trade War' Slogans, a Few Routes to Peace

Monday, 26 March, 2018 - 07:30

The flashy term “trade war” is being thrown around with abandon, but thankfully for now it’s actually more of a frontier skirmish.

While announcements fly back and forth between Washington and Beijing, what's been said -- and not said -- offers opportunities to de-escalate.

Consider the Trump administration's announcement of tariffs on steel and aluminum imports. The exemptions granted are significant: Mexico, Canada, the EU, Australia, Brazil and no doubt more to come. They now look more like they are aimed at China, but the process allowed for lots of room to maneuver.

The same anti-climax may follow the White House’s announcement this week of tariffs against imports from China (and Beijing’s proposal to levy tariffs on certain items from the US).

In short, everybody calm down and take a cool shower.

First: A fact sheet from the US trade representative shows the measures are far from immediate. USTR has 15 days to publish a proposed list of products to be subject to the tariffs. There is then a 30-day period of public comment on the proposals. The trade representative then reviews the comments and takes some time to conclude matters.

Second: The White House has called for a 25 percent tariff on certain Chinese imports. Um … 25 percent of what, exactly? Watch that space.

Let’s assume the timing and the implementation details are, like everything in Washington, subject to lobbying.

One group that has surely swung into action is multinational companies, many of them US-based. A lot of what the US buys “from China” does not originate there, but is assembled there from components made in other places. Deutsche Bank AG economists estimate that well over a third of American imports from China are produced in third countries. Can you think of any multinational corporations that might start to grumble? Apple Inc., for example, is based in Cupertino, California. The pieces that come together as an iPhone, though, tread a complex path to the door of your local Apple store.

Two other things Trump announced will take time. The Treasury Department has two months to piece together a response to China's investment practices in sensitive technology. Don’t expect big changes from this review. Even under existing rules, does any Chinese company now seriously think it has a chance to buy an American tech firm?

And I love this: The US will object to China's technology licensing rules through the World Trade Organization (another long process). Isn't the WTO up there with the press as a globalist enemy of the American people? As Trump might tweet: Interesting!

China's much-ballyhooed “hit back” proposal to tax imports from the US is only in response to the earlier Trump tariffs on steel and aluminum. Given the timing, it would be easy to conflate it all, but China was careful. The “hit back” over steel and aluminum could be read as a signal along the lines of: We are watching and waiting and showing we won't be pushed around, but we aren't going to get into some self-harming spat unless we really, really have to.

None of this is to say that China deserves praise for trade practices -- far from it -- or that the US should just sit on its hands. For both sides, there’s plenty of room to maneuver here and still claim victory.


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