Did China Think We Were Bluffing?
May 14, 2019
- China is walking back already agreed-to commitments in trade talks, leading the U.S. to increase tariffs from ten percent to 25 percent on $200 billion worth of Chinese goods
- China is preparing to retaliate, but it’ll likely backfire on their economy
- What effect do tariffs have on Wisconsin exports?
After ten rounds of U.S.-China talks to end the escalating trade war, it looks like we could be in for an eleventh round (and possibly more depending on how things go). China is walking back previously made trade-commitments, and the White House is standing firm by increasing tariffs to 25% on $200 billion of Chinese goods.
Did China think we were bluffing?
Some watching the situation think China may have been under the impression that the U.S. was ready to make more concessions after misinterpreting actions and statements by the U.S. government. According to the South China Morning Post, Hong Kong real estate tycoon Ronnie Chan Chichung expressed that “China had failed to pick up on several key points, leaving negotiators wrong-footed not only at the meeting but for the first 18 months of the Trump administration.”
Remember what’s actually at stake here
With all the hoopla around tariffs and escalating negotiations, the actual purpose of these tough trade negotiations is often forgotten — but it’s important to remember. Tariffs are the means to an end goal, but there is a lot more at stake than just our trade deficit with China. Here are the three main issues the administration hopes to accomplish with a new trade deal (which was initially addressed in a 150-page draft trade agreement that China later “systematically” edited and led to tariffs increasing from ten to 25 percent):
- Theft of U.S. intellectual property
- Forced transfer of U.S. technology
- Chinese currency manipulation
China has been playing unfairly for a long time, and they’ve now backtracked on almost all aspects of the initially drafted trade deal.
How do increasing tariffs impact you?
It seems that the more popular Chinese goods that we often buy are safe for now. “Products that Americans buy from China — clothes, shoes, toys, and electronics such as the iPhone — have not yet been hit with extra tariffs,” writes AP News. But other goods like furniture, luggage, seafood, and handbags will be affected, so keep an eye out on how the prices on those good change over time.
Wisconsin’s total exports are down .66 percent from 2017, although exports to Mexico are up more than ten percent. The biggest drop in the state’s exports was to none other than China, which went down 20 percent.
But what’s important to note is that although Wisconsin’s exports dropped slightly, the state also imported 5.1 percent less in goods during the first quarter of 2019 than in 2018. That means the state is relying less on imports from China — which were down 3.7 percent — making it appear as if we may actually be chipping away at the trade imbalance China has had over the U.S. for so long.
Tough trade negotiations in the short term can lead to economic benefits in the long term
To accomplish our goal of getting China to play by the rules, we have to look further than a 0.66 percent drop in Wisconsin exports or 15 percent increase in tariffs. We have to look at the fact that China’s exports are suffering AND their trade surplus in April actually narrowed by $18 billion.
The data shows that the U.S. economy has been roaring along while China’s economy continues to weaken and their trade surplus over the U.S. shrinks. We’ll keep you updated on the latest as trade talks continue and the 25 percent tariffs go into effect.