Despite Communist China’s Tough Trade Talk, America Has the Upper Hand

Beijing’s latest trade negotiations with Washington have offered its economy a measure of relief, at least for now. Reports suggest that container bookings across the Pacific have suddenly risen some 300 percent. The matter, however, is far from closed, and Beijing knows — whatever it says — that Communist China in this dispute stands at a great disadvantage.There can be no doubt that the American economy would suffer in a trade war with China. Prices on many consumer items would rise. Agriculture and other aspects of the economy that depend on exports would face pain as they searched for alternative markets. American producers who depend on Chinese-made parts and components would face a cost squeeze. As much as this economy would suffer, though, China would face something a lot worse. Figures from the Department of Commerce tell much of the story. Last year, China exported products to the United States worth the equivalent of some $439 billion, some 3 percent of that country’s economy. By contrast, the United States last year sold products worth only some $144 billion in China, barely one half of 1 percent of the U.S. economy. In other words, China is six times more vulnerable than the United States to a cutoff of trade.According to analyses by JPMorgan, a trade war with America would cost China some six million jobs out of the gate and eventually some 16 million. If a trade war cost China only half its trade with the United States, that would, according to calculations by Nomura Research, shave 1.1 percentage points off the nation’s growth rate. These are especially heavy burdens in an economy already suffering from a property crisis and other domestic economic impediments. Beijing’s answer to such threats is to claim that the world is bigger than America and that China can sell elsewhere. Although such claims make a nice counterpoint in negotiations and cover the ground when journalists ask the inevitable question, they stand up poorly on close examination.Europe, for one, hardly seems receptive to an increased flow of Chinese goods. Last year, after months of complaints about the economic damage from China dumping cheap electric vehicles on European markets, the European Union, much to Beijing’s consternation, imposed steep tariffs on these products. Still more recently, EU officials have indicated Europe’s need to prepare for additional dumping of other Chinese products as a result of a Sino-American trade war. Nor does it look likely that China can drastically increase its exports to Southeast Asia and the so-called Global South. Sales to these regions have already risen rapidly enough to elicit complaints about the damage done to domestic producers by Chinese imports. In response, economies in Southeast Asia, Latin America, and Africa have initiated tariffs on Chinese goods and imposed other trade-defensive measures, some 250 such actions at last count. Further complicating Beijing’s position is how buyers everywhere are all too aware of China’s predicament. Knowing the sometimes-desperate position of many Chinese producers, buyers throughout the Global South have demanded more favorable credit terms and payment delays than these producers ever gave American and European buyers. What is more, Chinese producers have complained to Beijing that they have none of the facilities to enforce contracts that they enjoyed in American trade.There is, of course, no telling where negotiations between Washington and Beijing will go, much less where President Trump intends to take them. What should be clear, however, is how urgently China needs a secure settlement in this matter. Perhaps Beijing will feel enough urgency to at last offer concessions on things such as patent theft and forced technology transfers about which American businesses and Washington have long complained.

Despite Communist China’s Tough Trade Talk, America Has the Upper Hand

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