World Trade War Has Begun

“By imposing tariffs of 25% on hundreds of products imported from China worth US$34 billion a year on Friday, July 6, the United States has violated the rules of the World Trade Organization and launched the largest trade war in the world’s economic history,” a statement by China’s Commerce Ministry declarae.

Beijing claims that it was committed to not firing the first shot, but has been forced to take action in response to the situation created by the United States and has notified the World Trade Organization.

“U.S. actions affect global supply and value chains, but they are also opening fire on everyone, including themselves,” said a spokesman for the Asian nation’s trade ministry.

The Chinese agency has denounced the mercantile “bullying” with which Washington is putting pressure on its trading partners by means of tariff threats that go against the conduct demanded today.

China called on all countries of the world to join forces against trade protectionism and to support multilateralism. The Asian giant claims to have wanted to avoid the trade war that the United States has provoked, but has been forced to fight this war as much as necessary to protect the interests of the nation and its people.

In retaliation, Beijing announced the introduction of an identical tariff rate for the same monetary value for several U.S. goods, some of which would begin to be taxed as of the date set by Washington.

A trade war between the US and China, the two largest economies in the world, could affect not only both nations, but the world economy as a whole, according to a projection by economists at Pictet Asset Management in London, one of Europe’s leading independent asset and wealth managers.

Some of the most immediate effects that are predicted in the war that is just beginning for U.S. consumers are the 25% increase in the price of products imported from China. These include technological products such as semiconductors and chips that are assembled in China, needed for the manufacture of consumer products such as televisions, computers, cell phones and vehicles, not to mention a wide variety of other products, from plastics to nuclear reactors.

Obviously, the US and Chinese economies will be the hardest hit, but they won’t be the only ones.

More than 90% of the products that will be damaged by US tariffs are intermediate productions or capital goods: that is, they are products that are needed to obtain other types of production.

U.S. tariffs will likely impact other goods not necessarily traded exclusively in the United States. In turn, China gets components from many other countries that end up in its finished products so any change in China’s export flow would inevitably disrupt these countries. About 91% of the 545 U.S. products that China, in retaliation, is taxing belong to the agricultural industry sector affect U.S. farmers, President Trump’s stronghold.

Companies such as Tesla and Chrysler, which manufacture in the United States and ship their products to China, will be hit in the automotive industry.

Among the economies that could be most vulnerable to a trade war are those that are most closely integrated into global value chains. This is how the process by which a product, for its manufactur, goes not only along the production line in a nation, but is added in more than one country until it reaches its final result is identified.

Many experts believe that Trump’s punitive measures against China, based on the unfounded allegation that the Asian nation is stealing U.S. technology, will somehow affect the impressive progress of the Chinese economy but will have an even greater negative effect on the lives and finances of U.S. citizens.

It will be necessary to know what are the calculations of profits and losses that can be derived from the trade war against China carried out by Wall Street’s corporate system. The survival of Donald Trump’s regime, with its constant outbursts and upheavals, will probably depend on these calculations.

Manuel E. Yepe is a lawyer, economist and journalist. He is a professor at the Higher Institute of International Relations in Havana.