CHINA WATCHHow China Tariffs Could Backfire on U.S.
Asia scholar says they could spark higher prices, supply-chain disruptions for Americans —and possibly help Beijing weaken our ties to allies.
President-elect Donald Trump’s longstanding plans to hit China with stiff tariffs would likely deal a blow to China’s already faltering economy, but it could also trigger some unintended negative consequences for the U.S. economy and foreign relations, economists say.
Trump warned last week that on his first day back in office he will impose 25 percent tariffs on goods from Mexico and Canada and an additional levy of 10 percent on Chinese imports. (He said during the campaign he would hit China with tariffs of 60 percent or more.) He said the nation’s largest trading partners need to take swifter, harsher action to halt the flow of illegal migrants and drugs into the U.S.
A revived trade war would further destabilize China’s economy, but economists and tax experts caution it would also harm the U.S. economy by increasing prices for American consumers and could lead to supply chain disruptions, labor shortages, and a currency war with China. In addition, it could provide China with new opportunities to get closer to traditional U.S. allies in Europe, the U.K., Australia, and Japan.
Rana Mitter, S.T. Lee Professor of U.S.-Asia Relations at Harvard Kennedy School, spoke with the Gazette about how China is viewing the prospect of new tariffs and preparing to respond. This interview has been edited for clarity and length.
The Chinese economy is already facing headwinds from a battered housing market and sluggish consumer demand. How is Beijing viewing the possibility of another trade war with the U.S.?
There are at least two different strands of thinking, which point in different directions. One of them is extreme concern about the way in which a tariff policy could essentially make China’s global export drive much more difficult to achieve, particularly into U.S. markets, which still remain very important despite the political difficulties between the two countries.
The other is much more about medium-term thinking. Some think that the imposing of tariffs could be the beginning of some new, hard-nosed, realistic negotiation with the United States, which could end up being a version of the Phase One trade deal that did exist under the first Trump administration.