Objecting vigorously to 73-year-old President Donald Trump’s tariffs on the world’s most populous country, China filed for injunctive relief with the Geneva-based World Trade Organization [WTO]. Trump claims that China has not met good on its promise in trade negotiations to stop intellectual theft of U.S. technology, instead letting Chinese firms pirate away whatever they need with impunity. Trump implemented an new round 15% tariffs on Chinese goods, after slapping China with 10% on $300 billion earlier this year. China retaliated in-kind, hitting U.S. manufacturers with similar tariffs but punishing U.S. farmers by canceling orders for wheat, corn and soybeans. China contends that the latest tariffs violated an agreement at the G20 in Osaka, Japan, where the U.S. agreed to hold off on any new tariffs. Going to WTO highlights the current impasse in the China-U.S. trade war rattling world markets.
U.S. and Chinese businesses are being hurt by the trade’ war, driving prices to consumers up, but, at the same time, causing uncertainty in world markets. New York-based International Monetary Fund estimates that the U.S.-China trade war has cut global Gross Domestic Product [GDP] by at least one-half-a-percent, though some economists say more. Given the worldwide slowdown, the U.S.-Chinese spat promises to cause more havoc in world markets until both countries can resolve the dispute. Trump plays a high-wire act with his reelection, pushing the U.S. economy into a slowdown, if not recession in 2020. Economists have already seen an inverted yield curve, measuring differences in yields between long-term and short-term treasury rates, forecasting a recession to come. Trump doesn’t have much time left to resolve the trade dispute or face a possible recession in 2020.
Beijing has filed two other lawsuits with the WTO challenging Trump’s tariffs, despite the WTO holding no jurisdiction over China’s theft of U.S. intellectual property. There’s little the WTO can do now or in the near future to force either country to ending the punitive tariffs rattling world markets. WTO sets reasonable standards for tariffs, something China claims the U.S. has breached. Trump contends that the WTO has no jurisdiction to resolve trade disputes involving intellectual property. U.S. Trade Representative Robert Lighthizer and chief economic adviser Peter Navarro contend that China promised, then reneged, on instituting laws against foreign property theft, something Trump wants in any trade deal. Chinese President Xi Jingping feels bullied by the U.S., promising to resolve the intellectual property theft issue internally, without implementing new laws.
Director of the U.S. National Economic Council Larry Kudlow says China is losing millions of jobs over the tariffs, urging Trump to stay the course. Yet if the U.S. economy lapses into recession in 2020, Trump’s economic team would be out of work. Instead of advising Trump to play a zero-sum-game with China tariffs, they should be advising the president co compromise with China, end the trade war and return to business-as-usual. It doesn’t matter at this point who’s right-or-wrong with regard to the current trade war. Going back to the table and compromising would be in the best interest of both countries, especially if it can help the world economy end the global slowdown that could lead to recession. Facing a recession in the U.S. would send many Trump supporters to the opposition party, hoping to do anything possible to turn the economy around.
Justifying it trade policy against China, the White House issued a draconic statement about the current trade policy. “China has taken the unilateral decision to adopt aggressive industrial policy measures to steal or otherwise unfairly acquire the technology of its trading partners; the United States has adopted tariff measures to try to obtain the elimination of China’s unfair and destructive technology-transfer policies,” read the White House statement. Accusing China of piracy does nothing to get back to the bargaining table to end the trade dispute. Whatever China’s practices, it serves neither country to continue tit-for-tat tariffs hurting both economies. Trump can easily resolve the dispute by getting China to agree to pay U.S. companies licensing fees for using technology. Forcing China to legislate-and-implement new laws prohibiting unauthorized technology-transfers is unrealistic.
Trump’s running out of time to turn the U.S. economy away from a slowdown and possible recession in 2020. Three’s only so much Federal Reserve Board Chairman Jerome Powell can do to slash already low interest rates. Short of starting a new round of quantitative easing, Powell admitted last week at the Fed’s annual retreat in Jackson Hole, Wyoming, that the Fed’s in new territory with Trump’s trade war. Trump floated the idea of a new tax cut that went over like a lead balloon. There’s no mood in Congress for more tax cuts, especially among House Democrats. If Trump wants to provide needed stimulus to the U.S. economy, he needs to end his trade war with China, not continue the tit-for-tat tariffs or expect the WTO to resolve the current spat with China. There’s nothing the WTO can do to resolve Trump’s trade war with China, other than limit the amount of tariffs.
