The sudden escalation of the trade war between the U.S. and China in recent days could lead to longer term shifts in not just China’s import programs but also in global manufacturing arrangements, according to experts at Wharton and Penn Law. U.S. trade policies that are not rooted in economic considerations but are driven by political postures could prove costly for U.S. businesses and consumers, in addition to eroding the country’s leverage in global trade, they warn.
The latest conflict between the two countries has seen tit-for-tat actions. China on May 13 announced that it will raise tariffs to between 5% and 25% on certain U.S. products entering its country, worth some $60 billion in annual trade. That came after the U.S. move on May 10 to increase tariffs to 25% on $200 billion worth of Chinese goods, with a threat to extend that to another $300 billion worth of imports from China.
“Tit-for-tat is an understatement,” says Wharton emeritus professor of management Marshall W. Meyer. China could end up hurting itself with those higher tariffs, especially in its imports of agricultural products from the U.S. “China has its own food crisis right now; they’re losing about half their pigs to African swine flu,” he points out. “And it looks like they’re about to impose tariffs on a variety of U.S. farm products.”
“The real pain will come if China resorts to other methods which are within the Chinese repertoire,” says Jacques deLisle, professor of law and political science at Penn, who is also director of the Center for East Asian Studies and deputy director of the Center for the Study of Contemporary China. “There’s quite a rich menu” of actions China could take, he adds. “Tariffs are certainly part of the mix … but there are a lot of other mechanisms for making it painful for U.S. companies and for U.S. exporters.”
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