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Nikkei Editorial

US-China trade feud threatens the global economy

Dialogue, not rash punitive actions, would benefit everyone

Shipping containers are loaded onto a Chinese vessel in Long Beach, California, in April. Will the countries allow their tariff spat to develop into a full-blown trade war?     © Reuters

The world’s two biggest economies have announced that they will impose stiff tariffs against each other on a broad range of imports. By doing so, the U.S. and China threaten to spark an all-out trade war that endangers the global economy.

Rather than rushing to retaliate against each other through sanctions and other punitive measures, could they not first try to ease tensions through negotiations? We believe the two sides should find common ground for compromise and back off on their tariff plans.

The cycle of retribution must end. Washington said it plans to impose additional 25% tariffs on $50 billion worth of imported Chinese goods in retaliation for alleged intellectual property theft. The U.S. will start by levying the duties on Chinese imports worth $34 billion on July 6, and on the remaining $16 billion worth of goods at an “appropriate time” later.

Beijing responded by saying it will implement reciprocal tariffs of the same scale, over the same time span and using the same rates.

U.S. President Donald Trump raised the stakes further on June 18 by threatening to impose an additional 10% tariff on $200 billion worth of Chinese imports.

The steep tariffs Washington has already levied on imported steel and aluminum have deepened its row with European states and Canada, among other nations. But the feud with China takes tensions to a new level for the U.S.

Given that China’s alleged intellectual property theft has become a major sticking point among industrialized countries, including Japan and European states, these countries should join hands in urging Beijing to address the issue. It is regretful that the U.S. has shunned such coordinated efforts in favor of embarking on unilateral sanctions that violate international trade rules.

Until only recently, Washington and Beijing would strive to strike compromises over perceived trade imbalances through high-level talks. The Trump administration once pledged to hold back on imposing retaliatory tariffs on China after Beijing agreed to import more American farm products and energy resources. That promise has been broken, however.

Washington is also considering restricting Chinese investment in the U.S. Scrapping an accord that two countries have worked hard to achieve and replacing it with a hard-line policy is dangerous.

Beijing has also announced it will slap punitive tariffs on hydroiodic acid and other products imported from not just the U.S. but also Japan. It appears as though China’s retaliation against Washington has spilled over to another trading partner -- an overreaction that we urge Beijing to avoid.

Fortunately, there is still time before the U.S. and China begin collecting steep duties on July 6. They should use this window to restart high-level talks aimed at calling off these hefty tariffs.

Washington bears a grudge against China not only because of its huge trade surplus but also over its “Made in China 2025” program to develop strategic industries. Many of the industrial sectors prioritized in the program are targeted by Washington’s retaliatory tariff plans -- a clear indication that the trade tensions stem partly from the countries’ struggle for technological hegemony.

China is challenging the existing world order through its military rise in the East and South China seas and its Belt and Road Initiative to build a massive economic zone. Washington, meanwhile, is ramping up the pressure to contain China. The fact that a struggle for global hegemony underlies the U.S.-China tariff spat means their trade tensions are not likely to be resolved quickly.

Nevertheless, we hope the two countries keep the door open for talks and continue their efforts to avoid a damaging collision. 

 

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