eBusiness Weekly
The recently announced trade “truce” with China didn’t last long: Unless negotiators led by Commerce Secretary Wilbur Ross reach a breakthrough in talks scheduled for this weekend, tariffs on Chinese exports are set to be finalised today.
That’s a victory for the administration’s trade hawks. It’s also a Pyrrhic one: As currently envisioned, the new measures would hurt the very companies they’re ostensibly trying to protect.
The tariffs have two goals — to reduce America’s trade deficit with China, but also to undermine China’s efforts to gain an advantage in the industries of the future. While specific targets have yet to be confirmed, the administration’s draft list focused heavily on the kind of high-tech exports China is hoping to boost through its industrial policies. The idea is that making those goods and services more expensive will help preserve the competitive edge of US companies — a lead that’s being eroded by Chinese subsidies, commercial espionage and infringements on US intellectual property.
It’s important to understand two things, however. First, US and other foreign companies remain heavily involved in China’s “export machine”. The value of exports produced by foreign-invested companies in China topped $979 billion in 2017 — a decline from a couple years earlier but hardly an insubstantial sum. Foreign firms account for 43 percent of China’s exports by value and will inevitably suffer alongside their Chinese rivals from any blunt application of tariffs. — Bloomberg.
