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FebUS President-elect Donald Trump challenged China frequently on trade area. The rationales of Trump's trade policy are "Call out China", "Keep Jobs in America" and "Shrink Trade Deficit". Specifically, Mr. Trump will declare China as a currency manipulator, end China's illegal export subsidies and lax labor and environmental standards, and lower U.S. corporate tax rate to keep American companies and jobs here at home. Moreover, Mr. Trump declared to force China to uphold intellectual property laws and stop their unfair and unlawful practice of forcing U.S. companies to share proprietary technology with Chinese competitors as a condition of entry to China's market.
From his speaking during campaign, Mr. Trump's economic plan is tough on China. His impressing words, "China's unfair trade behavior is prohibited by the terms of its entrance to the WTO and I intend to enforce those rules and regulations. And basically, I intend to enforce the agreements from all countries, including China.", infer a fierce trade war between U.S. and China will come out in the near future. Mr. Trump also floated a plan to impose a 45% tariff on Chinese exports to the U.S. in a meeting with the New York Times editorial board at the beginning of 2016.
However, based on the status of U.S. and China, we do not believe a wholesale renegotiation of the WTO is on the cards, nor blanket tariffs of 45% on Chinese imports as floated during the campaign. We expect an intense trade relationship between two countries in the first year of the age of Trump, but a glorious development of bilateral trade will come out after then.
Why do we hold this optimistic expectation? The two nations have a close economic relationship and a host of American companies have operations across China. In the past two decades, exports from the U.S. to China expanded by almost 300 percent and numerous jobs were created for American workers. Also, Americans benefit from cheaper goods made overseas, especially made in China. This is particularly true for poor and middle class Americans, who spend much more of their earnings on imported products. If severe trade barriers are implemented on Chinese goods, people will see a huge increase in the cost of living for Americans.
Mr. Trump's campaign speaking was so offensive that the public would expect extreme protectionist policies. However, the political system of the United States implies that Mr. Trump could not fulfill all the declarations. First of all, based on the U.S. Constitution, the Senate has an important role in the ratification of the treaty, and many international agreements related to trade belong to this category. In accordance with the treaty requirements, only when the 2/3 senators agree, the treaty will be eligible to be approved. Thus, the cancellation of the U.S. - China Trade Agreement (and the withdrawal of WTO and NAFTA, etc.), cannot be put into effect by Mr. Trump himself.
Secondly, according to U.S. law, the president, only under the state of emergency, can implement temporary tariff up to 15%. And the term of validity must be less than 150 days. Thus Mr. Trump's declaration of imposing a 45% tariff on Chinese goods is undoubtedly impossible to achieve.
Last but not least, over a long period, China and the U.S. have established systematic communication and dialogue mechanism. From the strategic economic dialogue (SED) between two nations and the bilateral committees, various kinds of communications and dialogue are playing an important role to enhance bilateral relationship.
No matter who becomes the president of the United States, trade frictions between China and the United States cannot be avoided. However, as long as two countries have good communication channels, it is possible to ensure that trade frictions will not turn into a fierce trade war. During the campaign, Mr. Trump's speech against China is very harsh, but he never said to cancel the dialogue and communication mechanism with China. Therefore, after Mr. Trump taking office, lots of his commitments on China's trade will not be honored.
In recent years the partisanship in the Congress has become more prominent on trade issues. The Republican is on behalf of the interests of large capitalists, who support free trade position firmly. On the contrary, the Democrat strongly opposes free trade. Thus the distribution in parliament seats becomes an important factor influencing the final voting results of the trade bill. For the 115th Congress(from 2017 to 2018, there are 243 Republicans and 198 Democrats in the House. For Senate, there are 53 Republicans and 47 Democrats. Such partisan pattern means that in the next two years, Congress will not fall into the quagmire of trade protectionism.
However, there is certainly a possibility that specific goods will be targeted for some extra tariffs, and that some tariffs may be temporarily imposed on various other imports to make good on campaign promises. Therefore, in the short run, there is a real possibility of escalating trade conflicts between the U.S. and China. However, the general trend of trade development between two countries will be glorious after the year of 2017.
Source: http://english.cri.cn/12954/2017/01/20/197s950190.htm
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