China-US trade war: We have to be tougher from now on

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Editor's Note: Cheng Dawei is a professor at the School of Economics at China's Renmin University. The article reflects the author's opinion, and not necessarily the views of CGTN.

China's Ministry of Commerce has announced today that China will have to take retaliatory actions to respond to the US' latest tariff decision, in order to safeguard the country's legitimate interests and the global free trade order.

On Sept. 17, a statement from the White House says that Donald Trump has directed the United States Trade Representative (USTR) to proceed with placing additional tariffs on roughly 200 billion US dollars of imports from China.

The tariffs will take effect on Sept. 24, 2018, and be set at a level of 10 percent until the end of the year. On Jan. 1, the tariffs will rise to 25 percent.

It seems unlikely and politically unrealistic to expect this guy to change his mind. By ignoring the voice of the business community and leaving no room for negotiation, such behavior has become shameful.

On July 6, when President Trump began the first-round of tariffs on Chinese products, I hoped that Trump, an enlightened egoist, would adhere to the rules of the game, but he manipulated it to its own advantage.

The new round would be in addition to the already imposed 50 billion US dollars worth of products, and Trump has threatened a third round of tariffs on another 267 billion US dollars of Chinese imports if China takes retaliatory action , which would mean levying duties on nearly everything China exports to the US.

Is it crazy and unrealistic? As of today, I now understand anything is possible, and the president of the United States can abuse his power like a spoiled kid.

President Donald Trump speaks during the Hispanic Heritage Month Celebration in the East Room of the White House on Sept. 17, 2018 in Washington, DC./ VCG Photo

China, on the other hand, has always attempted to alleviate the tensions between the two major countries in whatever way possible. For example, American businessmen have been invited to China to facilitate political and business exchanges between the two governments.

China also attaches importance to and pays special attention to every negotiation and always tries to make deals.

However, I think, from now on, China has to become tougher.

First, China could impose a limited sanction policy at those with close ties to President Trump and those who have actively engaged in political support for the rising trade war.

Although China's policy of welcoming American business and investment will not change under any circumstances, the country has to be tougher on certain groups of people who are losing their minds.

Second, China could form an alliance against the US. Traditionally, China has not created an alliance in the foreign policy sector, but China does use commercial relations to bolster its position.

The Great Hall of the People./ VCG Photo

I think China should speak more frequently and clearly in the international community, especially the World Trade Organization (WTO), and ask it to address China's concerns. Trump's trade action can be called “aggressive unilateralism”, and it will hurt all trading nations and the global economy at large, and destroy the rule of law.

Third, China should maintain its opening-up policy. China can use its trade policy to indicate its intentions, or project an overall foreign policy orientation. It is necessary for China to enact more free trade agreements in order to send a number of important messages: That China is now more engaged in multilateral diplomacy, supportive of free trade, and committed to working together with more countries.

Fourth, China should take a leadership role and work to save the rule-based global system.

Is the current rules-based global economic system safe? We can never be sure. We cannot be certain that the merging of interests will be strong enough to sustain the status quo, nor is there a guarantee that the current ideological embrace of the rule of law will survive President Trump's philosophy.

Sino-US trade conflicts./ VCG Photo

Trump seems to have his own philosophy on trade. He scorns the multilateral approach in favor of bilateralism and denies the Most Favored Nation (MFN) principle, which is core of the WTO rules. He prefers to use reciprocity as a basic principle of trade law, and uses protectionism in pursuit of free trade, which is the so-called "fair trade".

There is a risk that both American and international interests, ideology, and institutions will be inadequate to the task of preserving the current trading system.

I even doubt whether the American legal system has the power to restrain the President. When the Office of the US Trade Representative (USTR) held public hearings on Trump's tariffs, we heard that most American companies are against tariff sanctions.

Is the public hearing still useful in the policy-making process? If it is not, how can we believe that the American institutional system works well?

Fifth, China should keep its faith. For several months, Chinese leaders have been relatively successful in preventing anti-American nationalism from influencing possible negotiations.

Most Chinese are calm and still have hope. The new 200 billion US dollar tariffs will apply to more products, including refrigerators, air conditioners, furniture, televisions and toys.

Containers sit stacked next to gantry cranes at the Yangshan Deep Water Port in Shanghai, China, July 10, 2018./ VCG Photo

Most Chinese small businesses will, thus, suffer, and we have to be well-prepared to make ourselves stronger. Populism, anti-globalization, and doubts over literalism are not working in China.

Finally, China should focus more on domestic issues like economic growth, stability, and the quality of people's life. The central objective of fostering a peaceful international environment is to service domestic needs.

When facing tariffs, the Chinese government needs to build a safeguard mechanism and provide support to the sectors which are most affected. Also, business associations should take actions to help companies find alternative markets, so they aren't affected too much.

Despite the inevitable sacrifice that has to be made during the fight, China should be tougher this time. Only by being a tougher player can we stop trade friction, and protect our long-term national interests.

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