The fruitless endurance contest between the United States and China, two major powers of the world, is only spreading confusion throughout the international economy.
The U.S. administration of President Donald Trump has slapped a second batch of punitive tariffs against China citing intellectual property infringements. Coupled with the first batch unleashed in July, the total value of items targeted by the sanctions now stands over five trillion yen. An angry China is retaliating, and the trade war between Washington and Beijing is intensifying.
But the continuing exchange of salvos only exacerbates conditions on both sides. American corporations and families are suffering from the fallout. Car makers in the U.S. suffer from shrinking profits as they use steel and aluminum from China that are subject to the punitive action. Beverage prices went up as aluminum used for the drinks' cans is now more expensive.
In China too, the prices of U.S. food products went up. People are worried about an economic downturn, and stock prices plummeted.
Despite the pain being felt on both sides, the bilateral confrontation is feared to escalate further, because President Trump, eager to win the November midterm elections in Congress, is bent on seizing results by increasing pressure on China.
Washington will launch a third round of sanctions as early as September. A total of over 20 trillion yen worth of products, making up half of U.S. imports from China, will be targeted. As they include many household products such as electric appliances and clothes, American consumers will suffer more. China has declared it will retaliate. Now the economies of the two countries face the possibility of downturn.
If that happens, the world economy will be dealt a serious blow. Japan will certainly suffer greatly as many Japanese companies export products assembled in China to the United States.
The Trump administration is maintaining a tough posture because the U.S. economy is bigger than China's. Administration officials seem to think that Beijing will be the first to give up the fight if Washington maintains a brute war of attrition.
U.S. trade negotiators stuck to strong-arm tactics in recent talks with their Chinese counterparts, which were resumed after an approximately three-month hiatus amid the second round of retaliations between the U.S. and China. Trump did not place much importance on the negotiations, and no significant advances appear to have been made.
Certainly, China's intellectual property rights infringements are a problem. However, it does not justify unilateral U.S. retaliation in violation of international rules. Keeping a forcible posture will only invite China's mistrust and prevent a swift resolution to the confrontation.
China, meanwhile, should pledge to protect intellectual property rights and make other concessions. The Chinese side seems to think that they cannot make compromises that could have any bearing on the dignity of President Xi Jinping's leadership, but what's needed now is realistic judgment.
The governments of the U.S. and China are considering holding a summit of their leaders on the sidelines of an international meeting in November. They must ease tensions through repeated dialogue.