By Tyler Durden
Having lambasted China throughout the U.S. election campaign, drumming up headlines with his pledges to slap 45% tariffs on imported Chinese goods and to label the country a currency manipulator on his first day in office, Trump’s presidency was a bitter pill to swallow for China’s regime, which like many other nations, has voiced loud concerns in the past few days if Trump plans on following through with his threats. To be sure, there has been intense speculation over the impact of Trump’s win on issues facing the two countries, from global trade and climate change to the security balance in the Asia-Pacific.
So, in an attempt to reset the tense relations, in their first interaction since the U.S. election, Chinese state media said China’s president Xi Jinping told Trump in a telephone call that as the world’s largest developing and developed economies, there were many areas where China and the United States could cooperate, with the Chinese leader making it clear to the president-elect that cooperation is the only option:
“The facts prove that cooperation is the only correct choice for China and the United States,” China Central Television (CCTV) cited Xi as saying.
And while Xi explained to Trump that cooperation was the only choice for relations between the world’s two largest economies, Trump responded that the two had established a “clear sense of mutual respect”.
Xi’s remarks were a reiteration of phrasing typically used by Beijing to describe bilateral relations according to Reuters.
The two sides must “promote the two countries’ economic development and global economic growth” and “push for better development going forward in China-U.S. relations”, Xi said.
“During the call, the leaders established a clear sense of mutual respect for one another, and President-elect Trump stated that he believes the two leaders will have one of the strongest relationships for both countries moving forward,” a statement from Trump’s presidential transition office said. The two agreed to maintain close communications and meet soon, CCTV said. Xi had congratulated Trump in a message delivered shortly after his surprise election victory.
The Global Times, a nationalist tabloid published by the ruling Communist Party’s People’s Daily newspaper, said if Trump slapped China with heavy tariffs it would “paralyze” bilateral trade. “When the time comes, large orders for Boeing planes would switch to Europe, U.S. auto sales in China would face setbacks, Apple phones would essentially be crowded out, and U.S. soybeans and corn would be eradicated from China,” the paper said in a commentary. It was not exactly clear just how China envisions Europe’s far weaker economy as stepping in and replacing the US as dominant trading partner.
The Times, however, hedged by saying that “Trump, coming from a business background, is very astute. We do not believe he will treat China-U.S. trade so childishly.”
The Chinese newspaper was confident Trump would go through with his suggestion to impose a 45% import tariff, calling it “merely campaign rhetoric” and questioning its legal validity. U.S. law dictates that presidents can only impose tariffs of no more than 15 percent for a maximum of 150 days on all imports. As an example of earlier tariff-tit-for-tats, the Global Times pointed toward the 35 percent tariffs imposed in 2009 on Chinese tires. China retaliated with its own tariffs on U.S. car parts and chicken.
“Both China and the U.S. suffered losses as a result. From then on, the Obama administration waged no trade war against China. If Trump imposes a 45 percent tariff on Chinese imports, China-U.S. trade will be paralyzed,” the Global Times said. The opinion piece said Trump was a “shrewd businessman” and would not be naive, but, if he was serious with the policy, it would affect a number of U.S. industries.
“The new president will be condemned for his recklessness, ignorance and incompetence and bear all the consequences. We are very suspicious the trade war scenario is a trap set up by some American media to trip up the new president,” the Global Times wrote, demonstrating a far better understanding of geopolitical rhetoric than its US-based media peers.
That said, in light of the collapse of the TPP, China should be delighted.
With Pacific Rim region nations no longer having the option to pursue trade on preferable terms with the US, they will have no choice but to gravitate toward China’s sphere of trade influence, and accept any trade deal offered by Beijing.
Sure enough, China signaled it will promote plans for regional trade integration, vowing to seek support for a Beijing-backed Asia-Pacific free trade area at a summit in Peru later this month, after Trump’s win dashed hopes for the U.S.-led Trans-Pacific Partnership (TPP).
China is not America’s only nervous trade counterpart in a post-Trump world: the president-elect’s criticism of U.S. allies, including Japan, for free-riding on U.S. security guarantees, has deepened anxiety among Washington’s allies about its commitment to post-war security arrangements in the face of a rising China and volatile North Korea. Trump also appears to be seeking quick ways to withdraw the United States from a global accord to combat climate change, which has been billed by China and U.S. President Barack Obama as a key area for cooperation.
Tyler Durden is the founder of Zero Hedge.
This article was originally published in Econ Matters
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