China Trade Fights and More
DTN's Washington Insider
DTN/Progressive Farmer - 9/9/2020
Washington Insider: China Trade Fights and More
Bloomberg is reporting this week that the President is staking out a much more punitive position on future trade relationships with China. He is threatening to “punish any American company that creates jobs overseas.”
“We'll manufacture our critical manufacturing supplies in the United States, we'll create 'made in America' tax credits and bring our jobs back to the United States and we'll impose tariffs on companies that desert America to create jobs in China and other countries,” President Trump said on Monday.
“If they can't do it here, then let them pay a big tax to build it someplace else and send it into our country,” he said of US corporations. “We'll prohibit federal contracts from companies that outsource to China and we'll hold China accountable for allowing the virus to spread around the world.”
The report says that the president has recently emphasized the idea of “decoupling” the US economy from China—as US China hawks have long dreamed. “Whether it's decoupling or putting massive tariffs on China which I've been doing already,” he said. “We're going to end our reliance on China because we can't rely on China and I don't want them building a military like they're building right now and they're using our money to build it.”
Despite the president's comments, bilateral trade is one key area of US-China relations that hasn't worsened recently, Bloomberg says. Both nations are seen as reaffirming their commitment to a phase-one trade deal that stopped tit-for-tat tariff increases. China's trade surplus with the US in August was $34.2 billion, the highest since November 2018.
The president has increasingly sought to intensify the election-year trade issues but didn't say when he would implement the new policies. He framed the moves as part of a second-term agenda.
Overall, Bloomberg says that this year could become the most challenging period for the international trading system in modern history. It cites Edward Allen, a senior fellow at the Council on Foreign Relations, who thinks the next three months will be “pivotal” for the state of global trade. With protectionism on the rise in ways similar to the lead-up to the Great Depression, “the echoes of the 1930s are pretty clear,” he said.
Bloomberg focuses on several key political and economic events affecting trade, beginning with the WTO review of whether and how much the EU can retaliate against the US for its subsidies to Boeing Co. The EU has requested authorization for levies on $11.2 billion of US products, but trade experts say a lower figure is likely -- perhaps below the WTO's $7.5 billion award to the US in its parallel dispute against EU subsidies to Airbus SE.
There are hopes that a ruling would spur the US to restart negotiations to settle the 15-year-old dispute. A settlement would be a huge relief to European exporters, who are currently facing stiff US retaliatory tariffs.
However, Bloomberg thinks that the most important trade development this year will be the US presidential election. If the president is re-elected in November, it's likely the US will increase tariffs on foreign trade partners as a means to reshore and diversify America's supply chains, Bloomberg says. This could mean “more of the same--a roller coaster ride of volatility, threats, and tariffs,” said William Reinsch, a trade official in the Clinton administration and senior adviser at the Center for Strategic and International Studies.
If Democrat Joe Biden wins, “he has already said, in effect, that trade is going to be on the back burner while he deals with the pandemic and the economy,” Bloomberg thinks.
In the midst of all this, members of the WTO will attempt to select a new leader to help revive the “neutered” referee for international commerce…
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