Sourabh Gupta

Opinion | US and China: who tried to avert a trade war and who forced it?

The two have moved in entirely opposite directions over the past six weeks when it comes to fulfilling the bilateral obligations stemming from their May 19 agreement

Reading Time:4 minutes

Why you can trust SCMP

US President Donald Trump. Photo: Bloomberg

Sourabh Gupta

Published: 7:30pm, 7 Jul 2018Updated: 7:52pm, 7 Jul 2018

Fireworks, speeches , barbecues and feasts have traditionally marked America’s Fourth of July festivities going back to the 18th century. Add tit-for-tat retaliatory tariffs to the celebratory mix this year. In the week that America celebrated its 242nd birthday, the Donald Trump administration and its trade partners on both sides of the Pacific busied themselves enacting punitive duties on each other’s exports.

Canada went first, imposing duties on US$12.5 billion of US exports on July 1 (appropriately also Canada Day) in response to Trump’s steel and aluminium tariffs that kicked in last month.

On July 5, Mexico followed suit with its second tranche of duties on US$3 billion worth of US exports – mostly agricultural products, also in response to Trump’s steel and aluminium tariffs. On Friday, US$34 billion worth of Chinese exports to the US across 818 tariff lines were subject to an additional 25 per cent duty.

US-China trade war: not about trade, not about Trump. Here’s what it is about

When these Section 301 duties go into effect, Trump will have plumbed yet another a low in his already dismally low governing record. From the Iran deal to the Paris climate agreement to the Trans-Pacific Partnership (TPP) agreement, Trump has had no compunction tearing up solemn international commitments entered into by his predecessors. The imposition of these tariffs on China would constitute the first instance, however, of him materially reneging on his own solemn commitment to an international partner.

Over the third weekend of May, Trump’s Treasury Secretary Steven Mnuchin and President Xi Jinping’s economic tsar, Vice-Premier Liu He, delivered a win-win, principles-based deal to tide over the seemingly indissoluble US-China trade, investment and intellectual property rights quarrels. Suspending the US$50 billion worth of Section 301 tariffs was at the core of their consensus.

China has ‘nuclear options’ in trade war with US … really?

In exchange for setting aside tariffs, the US was to enjoy ramped-up agriculture and energy sales in the Chinese market, ensure that Beijing’s patent laws got appropriately tweaked, obtain gradual investment liberalisation in additional Chinese sectors, and subject Chinese investment in the US to qualitatively more checks. They released a statement on May 19 that confirmed their consensus and in an Oval Office meeting, Trump blessed it expressly.