The U.S. administration of President Donald Trump announced a third set of punitive tariffs against China citing intellectual property violations. This latest measure has taken the trade war between Washington and Beijing into a new dimension.
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The U.S. has substantially increased the coverage of the sanctions. The amount of imports targeted by the latest measures reaches about 22 trillion yen, four times the aggregated figure for the preceding two sets of punitive tariffs. Overall, half the imports from China will be under higher tariffs.
China is naturally going to retaliate. But the amount of imports from the U.S. targeted by the latest Chinese action will be around 6 trillion yen -- the first time that Beijing's reaction is smaller than the American move. This is because China has little room to maneuver due to its smaller amount of imports from the U.S. compared to American imports of Chinese goods.
President Trump says he would apply high tariffs on all Chinese imports should Beijing hit back. He apparently intends to win a major concession by flexing America's economic muscle with the midterm elections in the U.S. Congress in November fast approaching.
Another thing we should worry about is that this new development could lead to the world economy suffering even further.
Protectionism restricts not only the Chinese economy but the American market. Many items targeted by the large scale sanctions by the U.S. include products people use daily such as home electronic appliances and clothes. Price hikes of these items would deal a direct blow to U.S. consumers.
The international division of labor based on free trade may dissolve amid the intensifying trade war. China hosts Japanese, American and European factories, which import parts from Asian countries and export the final products to the U.S., driving growth of corporations involved in different countries. If they are forced to move out of China, investment would decline.
It is possible that Trump could trigger a global recession that would deal a serious blow to his own people and U.S. companies.
Behind the strong-arm tactics of the United States is its competition with China over the dominance of the high-tech sector. Washington is worried that the state-of-the-art technologies owned by American companies may be stolen by China.
Indeed, China's violation of intellectual property is a problem. But it does not justify a unilateral sanction rooted in the "America First" ideology that would bring a negative chain reaction to the international community.
The economic meltdown 10 years ago caused by the collapse of American investment banking giant Lehman Brothers showed that multinational cooperation, including coordination between the United States and China, is vital for the stability of the world economy.
Back then, there were also fears that the expansion of protectionism would worsen the recession. That vicious cycle did not transpire because countries worked together to avert such an outcome.
The U.S. and China now have a bigger presence in the world economy compared to 10 years ago, and thus shoulder greater responsibilities. Washington should seek a solution through dialogue. Meanwhile, Japan should work together with Europe and others to call for restraint by the warring parties.