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Trump Trade War – Why China Is Smarter Than E.U. In The Game



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Mar 05 2018
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Trump has started World Trade War by imposing a 25% tariff on steel imports and 10% tariff on aluminium imports. Since then, he has been waiting for retaliations – from both friends and foes. So far China, supposedly the biggest culprit who has been accused of dumping the metals on American soil, has declared they do not wish to fight America, not that they care in the first place.

 

China could simply impose their own tariffs on soybean and sorghum (a cereal grain used to feed livestock) from United States. More than half of U.S. soybeans exports (worth US$14 billion in 2016) go to China. Similarly, more than 90% of sorghum arrivals in China come from the U.S. – worth US$1 billion last year. Clearly, if the Chinese hits back, American farmers would suffer terribly.

 

But the pragmatic Chinese has its own reasons not to retaliate, for now. The tariffs on steel and aluminium would hardly affect the Chinese. They’re not even the top-10 biggest steel exporters to the U.S. Still, they can’t sound too happy about Trump being fair and generous on them – slapping tariffs on every country instead of specifically targeting China.

China Export Steel

The Chinese believe that after Trump’s visit to Beijing last year; they pretty much know how to deal with the U.S. leader. By giving him an easy win over the latest steel and aluminium tariffs, China hopes Trump would feel incredibly happy and leave them alone. The plan was for Trump to think that China has surrendered without any counter-tariffs which could hurt American farmers.

 

By saying that China does not want a trade war with the United States but will defend its interests, Beijing sends a message to both their own people as well as Washington – that the tariffs isn’t a big deal while allowing the victorious Donald Trump to gloat. Beijing was just flattering Washington but Trump actually declared on Friday that “trade wars were good and easy to win.”

 

Beijing’s strategy, besides containing the U.S. president, was also to test water on Trump’s potential reaction when other countries start threatening counter-tariffs against the America. Trump’s latest protectionism measure also provides a good opportunity to China to project the Middle Kingdom as a defender of the global trading system.

President Donald Trump and President Xi Jinping - Laughing

It was purely rhetoric when China insists that they will not sit idly by and will take necessary measures if the US hurts their interests. It was also purely self-promotion when China insists that they share a common interest with Canada, South Korea, Europe and other large steel and aluminium exporters in protecting global trade. China wants to replace United States as the world’s new “leader”.

 

Heck, President Donald Trump was so impressed that he even praised Chinese President Xi Jinping after the ruling Communist party announced it was eliminating the two-term limit for the presidency, paving the way for Xi to serve indefinitely. Mr. Trump, expressing his support for semi-dictator Mr. Xi, said – “He’s now president for life, president for life. And he’s great.”

 

On the other hand, European Union plays a different game. Refused to give way to Trump, E.U. has chosen to give Donald Trump a run for his money instead. They quickly vowed retaliation for the tariffs, saying they would enact a similar action on Made-in-USA products such as Harley-Davidson motorcycles, Jack Daniels bourbon whisky and Levi’s blue jeans.

Jack Daniels Whiskey

Unfazed, Trump immediately challenges E.U., threatening to slap new tariffs on European cars which freely pouring into the United States. And the biggest victim of them all is none other than Germany. About 70% of 350,000 BMW cars sold in the U.S. every year come from Europe, generating up to US$9 billion in revenue for the E.U.

 

Currently, cars being shipped from the U.S. into Europe faced a 10% import duty while European cars into the U.S. faced only a 2.5% import duty. Clearly, there are a lot of ammunitions which Trump can fire to punish European Commission President Jean-Claude Juncker – if E.U. dares to proceed with its threat on American goods.

 

Trump’s retaliatory measures are exactly what China wants to avoid. But E.U. leaders, mostly liberals and globalists, didn’t want to give face to nationalist Trump. The U.S. president in 2017 referred to Germany as “bad, very bad” for its millions of cars sold in the United States. But Germany justified that they had invested in 265 plants and employed 110,000 American workers.

Trade War - United States VS European Union - BMW

While it’s true that German automakers such as BMW, Daimler and Volkswagen have investments in the U.S., at least 10 major European carmakers who sell in the U.S. do not produce there – inclusive of Italy’s Fiat, the U.K.’s Land Rover, Jaguar, Audi, and Porsche. It’s also true that the U.S. imports more from Europe than the continent absorbs in American goods.

 

In 2016, the E.U. shipped more than 6 million cars abroad, and the U.S. – its largest market by far – absorbed more than 1 million of those automobiles. In 2017 alone, the U.S. imports so much from the Europe that it contributed to the trade deficit worth more than US$11 billion. Naturally, following Trump’s tweets of retaliation, European carmakers have been eerily quiet.

Trade War - Trump VS EU European Union

 

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