After recent talks between the U.S. and China failed to offer any sort of end to the ongoing trade war, market experts are worried that the conflict might last longer than expected. Post the talks, America increased tariffs on US$200 billion worth of Chinese imports to 25 percent. Meanwhile, China has announced that it would increase tariffs on U.S. goods worth US$60 billion. However, Beijing seems to be running out of options when it comes to slapping tariffs on U.S. products since trade between the two nations is heavily in favor of the U.S., and China has more to lose.
The roadblock to the trade agreement is said to be China’s attitude toward fulfilling commitments. Earlier, Beijing had agreed to implement a series of measures as per U.S. demands including market reforms that would make foreign investment easier, strong action against the theft of American intellectual property, ending government subsidies for domestic companies, and so on. However, all such promises have not materialized into concrete actions.
During multiple exchanges with their Chinese counterparts, U.S. officials realized that they were being taken for a ride and insisted that any agreement must be strictly enforced. “China has been cheating for far too long… Now is that moment in time to get the right trade agreement with China,” Rep. Kevin Brady of Texas, top Republican on the House Ways and Means Committee, said in a statement (The Epoch Times).
To put further pressure on Beijing, President Trump announced that the government is looking at imposing tariffs on an additional US$300 billion worth of Chinese imports. If China does not arrive at a mutually beneficial arrangement within the next few weeks, the new tariffs are expected to come into effect in June or July. Trump seems to have understood that the only way to make the Chinese communists accept America’s terms is to go after their economic interests without mercy.
“I know that President Trump is not going to back down. That’s one thing you can take to the bank. He is not going to back down. He understands exactly what’s at stake here… Should the Chinese prevail — the Chinese Communist Party prevail in their efforts to undermine American industry and the American economy and the American country everything that we know and value and cherish will become an artifact of history,” Curtis Ellis, a Senior Policy Advisor with America First Policies, said to The Epoch Times.
Moving out from China
Several companies have started moving production units from China. Ricoh, a Japanese electronics company, will be shifting production of U.S.-bound printers from its Chinese unit to an existing facility in Thailand to avoid increased tariffs. Another Japanese firm, Sumitomo Heavy Industries, shifted the manufacture of certain machinery components from its Chinese facility back to Japan. Kobe Steel is reportedly planning to move production of U.S.-bound components to places like Thailand, Japan, and the U.S.
“The medium- to long-term ramifications on supply chains are being deeply underestimated. I would be severely concerned if I was China,” Robert Lawrence, a nonresident senior fellow at the Peterson Institute for International Economics, said in a statement (Reuters).
India is fast becoming a promising alternative for businesses who wish to move away from China. Wistron, a company from Taiwan that assembles iPhones, recently received government approval for a US$710 million production facility in India. Samsung has planned a US$356 million investment in India for two manufacturing facilities to produce batteries and displays for its phones.