U.S, China’s reciprocally punitive tariffs likely to endanger free trade

The Yomiuri ShimbunThere is no winner in a trade war in which high tariffs are mutually imposed. Efforts should be made to restrain futile punitive and retaliatory measures and persistently pursue a course toward resolving the current trade dispute through dialogue.

The United States has imposed punitive tariffs on Chinese products worth $34 billion, or about ¥3.8 trillion, citing the latter nation’s violation of intellectual property rights as a reason for the move. In return, China has slapped retaliatory tariffs of a similar scale on U.S. products.

As a second round of punitive steps and retaliatory tariffs, both nations are considering a plan to mutually impose additional tariffs on products worth $16 billion.

The free trade system — an engine for growth since the end of World War II — faces a crisis due to a bitter conflict between the two major economic powers. The situation is disturbing.

The system that supports free and open trade has continued to activate a flow of goods and money, and sustain economic activities across national borders. The main pillar of this has been none other than the United States, which has played a leading role in creating trade frameworks while also enjoying the greatest benefits of the system.

The United States is undermining the system whose establishment it chiefly facilitated. The punitive moves made by the United States, based on its protectionism, must be described as folly.

The United States and China account for about 40 percent of the world gross domestic product. There are concerns that reductions in exports from both countries due to their high tariffs could lessen production, investment and consumption, thereby slowing down the solid condition of the global economy.

U.S. harming itself

High tariffs will be imposed on the products exported by foreign corporations from their factories in the United States and China. This is likely to extensively affect corporate supply chains.

Another cause for worry is unrest in financial markets. In China, there has been a continued decline in stock prices and the value of the yuan because of concerns about a sharp rise in trade friction. Attention should be paid to the risk of currency depreciation and falling stock prices spreading to markets in nations around the world.

China has chosen soybeans as a target for its retaliation. Sixty percent of U.S. soybean exports are bound for China. In anticipation of cuts in such exports, soybean prices have already dropped sharply.

Many soybean-producing areas in the United States are support bases of the ruling Republican Party, but there are rising calls to reconsider the current trade policy.

The U.S. administration should turn its attention to the reality that the adverse effects of protectionism are rebounding onto its own country’s industry and employment.

The U.S. punitive targets include a conspicuous number of high-tech products, including semiconductors and robots. This is probably because the United States is competing with China to gain supremacy in such cutting-edge industries.

China has continued unfair practices, such as providing large subsidies to domestic companies. The United States’ awareness of the need to rectify the problems involved is understandable. However, its self-centered approach, which disregards international rules, is not permissible.

Future attention will be focused on whether the United States will increase tariffs on automobiles. The Trump administration will decide as early as in August whether to go ahead with punitive measures.

The automobile business is a key industry for Japan and European nations. Our nation needs to closely cooperate with European countries in persistently urging the United States to change its mind.

(From The Yomiuri Shimbun, July 8, 2018)Speech


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