China warns of backlash to US trade protectionism

US President Donald Trump displaying the executive order after signing it at the White House on Tuesday. China's reaction has been cautious, with the Commerce Ministry suggesting that Beijing would take the case to the WTO.
US President Donald Trump displaying the executive order after signing it at the White House on Tuesday. China's reaction has been cautious, with the Commerce Ministry suggesting that Beijing would take the case to the WTO.PHOTO: EPA-EFE

Double-edged sword could hurt party wielding it, says spokesman

China has warned that trade protectionism is a double-edged sword that could hurt the party wielding it, in response to the United States' slapping of steep tariffs on washing machines and solar panels.

This comment yesterday from Foreign Ministry spokesman Hua Chunying came a day after the Ministry of Commerce expressed "dissatisfaction" at the new tariffs that to some observers looked like the first shots of a trade war.

Chinese media yesterday warned that China may take retaliatory measures if the US should levy more tariffs, although there were no immediate tit-for-tat moves from Beijing.

"Trade protectionism is a double-edged sword. In using it to hurt others, the wielder also hurts him or herself," Ms Hua said at a regular press briefing yesterday.

Noting that China would become the world's largest market, with a market size that is potentially three to four times that of the US, she said China would promote economic and trade relations with other countries through increasing the "cake of cooperation".

On Monday, US President Donald Trump had signed an executive order imposing tariffs of 30 per cent on imports of solar cells and panels, and 20 per cent to 50 per cent on washing machines. The move on solar panels is seen as largely aimed at China, and South Korea is the target for that on washing machines.

Mr Trump dismissed fears of a trade war when he signed the order. "There won't be a trade war. It will only be stock increases for companies that are in our country," he said.

He added: "You are going to have people getting jobs again, and we are going to make our own product again. It has been a long time."

China's reaction has been cautious, with the Commerce Ministry saying that the US, in resorting to domestic law rather than World Trade Organisation (WTO) dispute settlement procedures, had undermined international order, and suggested that Beijing would take the case to the WTO.

"With regard to the wrong measures taken by the United States, China will work with other WTO members to resolutely defend our legitimate interests," it said.

However, the nationalistic Global Times tabloid cautioned that tariff policies worked both ways, and said the Chinese government should put in place response strategies to prepare against further such moves by the US against China.

Still, the possibility of retaliation is not imminent, given the smallness of China's exports of solar panels to the US in relation to total bilateral trade.

"The trade measures launched seemed pretty minor," said Dr Raymond Yeung, chief economist of Greater China at ANZ bank.

He added that China exported just US$14 billion (S$18.3 billion) of solar panels to the US in 2016, which amounted to just 0.66 per cent of its trade with the US. Direct impact on Chinese exports would be small.

"I don't think they need to retaliate in response to this," he said.

However, Mr Rajiv Biswas, Asia Pacific chief economist of IHS Markit, thought China may apply some "symbolic countermeasures" for important US exports to China, such as agricultural products.

Mr Biswas does not think that either side wants to get into a trade war.

"It is very unlikely that either the US or China would want trade frictions to escalate into a trade war, which would be damaging for both nations as well as harming their overall bilateral relationship," he said.

Instead, the US would use a range of trade policy "sticks" to address the widening trade deficit with China, such as anti-dumping actions and investigations into unfair trade practices and violations of intellectual property rights.

The intent, he said, was to "gain leverage in its bilateral negotiations with China in order to gain enhanced market access for its exports of goods and services, and to narrow the large bilateral trade deficit".

Dr Yeung believes China would not retaliate unless the US imposed broad-based tariffs.

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A version of this article appeared in the print edition of The Straits Times on January 25, 2018, with the headline 'China warns of backlash to US trade protectionism'. Print Edition | Subscribe