US abuse of tariffs goes against the trend of the times

By Ambassador Wu Peng

Recently, the United States Government, in disregard of widespread opposition at home and abroad, has abused the tool of tariffs to blackmail and coerce global trading partners, including China. This unilateral and protectionist move infringes on the legitimate rights and interests of other countries, violates the WTO rules, undermines the rules-based multilateral trading system, and impacts the stability of the global economic order. The Chinese government strongly condemns and resolutely opposes such a move.

First, US abuse of tariffs highlights its unilateral bullying nature and seriously infringes on the legitimate rights and interests of other countries.

The US government frequently and indiscriminately wields the big axe of tariffs to exert pressure on other countries, using tariffs as a weapon to profit from the world. It is essentially practicing power politics in the economic and trade area, and pursuing “American privileges”. The US suspension of “reciprocal tariffs” on some of its trading partners is just a small symbolic step. It doesn’t change the essence of the US seeking its own gains through trade blackmail. The US tariff policy is arbitrary and unpredictable. The US side never consults with other countries, which is extremely disrespectful to all other sides and highlights its arrogance.

While the US does have a deficit in trade in goods, it has a large surplus in trade in services, where it enjoys an absolute advantage. The US side deliberately ignores this fact and chooses to impose tariffs indiscriminately, which is tantamount to depriving countries of their right to development, especially the Global South countries. According to WTO data, in the context of unequal economic development and unequal economic power, the US tariff policy will further widen the wealth gap between countries, and less developed countries will suffer a greater impact. This policy only serves the hegemonic interests of the US at the expense of the legitimate interests of all other countries, and is bound to be rejected by the international community. 

Second, US abuse of tariffs cuts off global supply and industrial chains, and seriously disrupts the economic development of other countries.

The global industrial and supply chains are formed and developed naturally as a result of maximising the efficiency of allocating production factors in the global market. The cooperation between China and America in industrial and supply chains is not a zero-sum game, but a two-way choice of mutual benefits. The US imports a large number of consumer goods, intermediate goods and capital goods from China, which supports its manufacturing industrial and supply chains, enriches the choices of American consumers, reduces their cost of living, and improves the real purchasing power of its people, especially the middle-and-low-income groups.

By going against the economic law, the US government intends to force the reshoring of the manufacturing industry through these tariffs. Such attempts are doomed to fail, as the tariffs will gradually affect the industrial chain and supply chain, and aggravate the risk of supply chain disruption and industrial hollowing out. These tariffs can hardly revitalise the US manufacturing industry. On the contrary, they will weaken the US industrial base. The Mechanical Engineering Industry Association (VDMA) based in Germany has warned that, the US government’s imposition of a wide range of punitive tariffs will cause serious damage on both sides of the Atlantic. Not only will it fail to solve bilateral trade issues, it will also trigger an escalated confrontation where mutual barriers are set. Not only will it damage the export interests of European enterprises, it will also impede the transformation and upgrading of US industries. The US “tariff blackmail” seriously disrupts the stability of the global industrial and supply chains, and distorts the allocation of resources in the global market, which hurts others as well as itself.

Third, US abuse of tariffs will not solve trade deficit, and the negative impacts will surely backfire.

The US tariff policy is a false synthesis based on faulty calculations and faulty economic logic, and American consumers and multinationals will bear the brunt of its negative impacts. The predictions from Yale University’s Budget Lab indicate that a broad 20% tariff in the US could cost the average American household up to $4,200 per year. Goldman Sachs has raised the probability of a US recession in the next 12 months from 20% to 35%, noting that soaring tariffs could hamper economic growth, push inflation and increase unemployment. 

President Xi Jinping has said that one will not be seen in a more favourable light after blowing out others’ lamp, nor will they go farther by blocking others’ paths. The US trade deficit is caused by imbalance between its domestic savings and consumption structure. It is the inevitable result of the US dollar’s role as the world’s primary reserve currency. History has proved that raising tariffs cannot solve America’s own problems, nor can it “make America great again”. The United States government launched a tariff war against China in 2018, only leading to expanding US trade deficit from $792.4 billion in 2017 to $901.5 billion in 2020.

Fourth, China firmly opposes US bullying, and will continue to share development opportunities with other countries.

China does not provoke trouble, nor are we intimidated by it. Pressuring and threatening are not the right way in dealing with China. Recently, China has taken a series of necessary countermeasures to firmly safeguard its own sovereignty, security and development interests. If the U.S. is allowed to wilfully undermine the international order, the world will go back to “the law of the jungle”, and the Global South countries will become the biggest victims. China has stood up to the powerful not only to safeguard its own legitimate rights and interests, but also to uphold international fairness and justice, as well as the common interests of the international community, especially those of the Global South countries. It was China’s resolute fight that forced the U.S. to announce a 90-day pause on reciprocal tariffs for countries except China. A just cause enjoys the support of many. America’s move that goes against the trend of the times will find no support and end up in failure.

Building a wall with tariffs will not change the law of market or stop cooperation. As the second largest economy and second largest market for consumer goods, China is committed to opening ever wider to the world, no matter how the international situation changes. We will continue to advance high-standard opening up. We will steadily expand institutional opening up in rules, regulations, management, and standards. We will implement high-standard policies for trade and investment liberalisation and facilitation. We will foster a first-class market-oriented, law-based, and internationalised business environment. And we will continue to share our development opportunities with the world to achieve mutual benefits.

Trade wars and tariff wars have no winners, and protectionism will lead nowhere. In the face of the serious negative impact of the US tariff policy, countries around the world should strengthen communication, coordination, solidarity and cooperation, practice true multilateralism, uphold the international system with the United Nations at its core and the multilateral trading system with the WTO at its core, support an equal and orderly multipolar world and a universally beneficial and inclusive economic globalisation, and work together to build a community with a shared future for mankind.

* Wu Peng is the Chinese Ambassador to South Africa.

** The views expressed do not necessarily reflect the views of IOL or Independent Media.