Irresistable US meets immoveable China in a Sino-American trade war of unexpected consequences
 Despite the tariffs raining down in the Sino-American trade war, Chinese containerised imports have continued to flood across US docks much to the surprise of some and to the dismay of others.
As London's Financial Times pointed out, America’s merchandise trade deficit with China jumped 4.3 per cent to a seasonally adjusted US$37 billion - a record high.
The increase was an eight per cent rise in US imports from China, while US exports to China remained flat. And that wasn’t just an anomaly. In the third quarter, America’s deficit with China soared to $106 billion, up from $93 billion in the same period last year.
For the year to September, America’s trade deficit with China increased to $305 billion, up from $276.6 billion last year.
Imports at major US ports remained unusually high as retailers continue ship in goods before tariffs bite this month, according to the monthly Global Port Tracker from the National Retail Federation (NRF) and Hackett Associates.
"Imports have usually dropped off significantly by this time of year, but we're still seeing numbers that would have set records in the past," said National Retail Federation (NRF) vice president Jonathan Gold.
"Part of this is driven by consumer demand in the strong economy, but retailers also know that tariffs on the latest round of goods are set to more than double. If there are shipments that can be moved up, it makes sense to do that before the price goes up."
Said Ben Hackett, founder of Hackett Associates: "President Trump's trade war with China and the threat of even higher tariffs in 2019 have created a mini boom in imports and businesses have rushed to bring goods into the country ahead of the tariffs. We are clearly in a politically motivated trade environment."
Ports covered by the survey handled 1.87 million TEU in September, the latest month for which after-the-fact numbers are available. That was down 1.3 per cent from August, but up 4.6 per cent year on year.
Of course, the corollary of this good news is the likelihood, verging on dead certainty, that there will be a compensating downturn starting now when a) US retailers are all stocked up and b) the tariffs bite and have their intended consequences.
So what's up? The FT says much the same and adds a few reasons of its own. The US economy is firing on all cylinders and buying more Chinese imports as it grows; the cost of tariffs has also been offset by a weaker yuan.
The loss of the House of Representatives of free-market Republicans to the statist Democrats has also dampened the mood in what many thought was an over-exuberant stock market. Still, there is reason to think with a new recalcitrant House, pledged to bring the Trump administration down, will bring more bears than bulls to the market in months to come.
This becomes more likely if China appears to be winning the trade war, the slightest evidence of which will be loudly trumpeted by the educated elites in the media, academy and the civil service. And already, there is evidence that China is winning.
Said Maersk group CEO Soren Skou: “Chinese companies find it easier to source substitutes for American products than the US does in replacing Chinese imports.”
While it may appear that China is winning the trade war, there are important reasons to hedge one's bets, say others. The rising deficit with China is probably a short-term phenomenon, and seems unlikely to persist if the US follows through with its threat to extend tariffs to all Chinese imports and raise rates from the current 10 per cent to 25 per cent should the two nations fail to reach a deal.
Even so, growth in the US deficit so far demonstrates it is hard to predict the precise consequences of a trade war.
China has submitted a list of compromises it’s willing to consider. But Mr Trump has dismissed that list as “not acceptable”. Chinese President Xi Jinping has already declared that a trade war would produce “no winners” - but he offered no indication that China is willing to make further concessions.
US vice president Mike Pence was uncompromising. The US “will not change course until China changes its ways,” he said. Mr Pence also attacked Mr Xi’s signature “Belt and Road” initiative and warned Asian nations to shun loans from China that could compromise their sovereignty.
Efforts to find common ground have been unsuccessful. Trump was conspicuously absent and sent Mr Pence instead. He and Mr Xi swapped barbs, setting a contentious tone for the trade talks. The US has adamantly opposed the way WTO treats China as a market-driven economy rather than one dominated by state-supported industries.
The same, sharp differences that have crippled trade between the two nations had made working out common language impossible, said those working on a joint communique.
Mr Xi urged the business and political leaders to promote free trade. "The world today is going through major development, transformation and change," Mr Xi said. "While economic globalisation surges forward, global growth is shadowed by protectionism and unilateralism."
The United States said it offers a better option for economic partnership and criticised Chinese “authoritarianism and aggression”. The US seeks "collaboration and not control" and blasted China's road-building programme as forcing debt on poor countries.
“We don't drown our partners in a sea of debt, we don't coerce or compromise your independence,” Mr Pence said. “The United States deals openly and fairly. We do not offer a constricting belt or a one-way road.”
For its part, China’s foreign ministry has denied leading developing nations into debt bondage. “The assistance provided by China has been warmly welcomed by our partners in this region and beyond,” said foreign ministry spokesman Wang Xiaolong.
The Trump administration has now placed tariffs on $250 billion of Chinese goods. The administration also has warned that duties on another $267 billion in goods, which would subject to tariff virtually all Chinese-made products shipped into the US.
China retaliated by levying tariffs on $110 billion worth of a wide variety of US products, including farm equipment, soybeans, electric cars, orange juice, whiskey, salmon and cigars.
However, Mr Xi appeared to warn against any further escalation of tensions between the two countries.
"History has shown that confrontation, whether in the form of a cold war, a hot war or a trade war, will produce no winners," he said. |
