Trade Agreement, Just Pragmatic Choices of the Government?
China finally decided to retaliate on United States (US), by setting a new import tariffs, ranging from 5 to 25 percent on US$60 billion goods, including frozen vegetables and liquefied natural gas, said an official statement on Monday (05/13) - Photo: Special

JAKARTA (TheInsiderStories) – China finally decided to retaliate on United States (US), by setting a new import tariffs, ranging from 5 to 25 percent on US$60 billion goods, including frozen vegetables and liquefied natural gas, said an official statement on Monday (05/13).

The new tariff will be implemented starting on June 1. China Foreign ministry stated that it will not surrender on external pressure.

“China’s adjustment on additional tariffs is a response to US unilateralism and protectionism. China hopes the US will get back to the right track of bilateral trade and economic consultations and meet with China halfway,” said China’ Finance ministry statement.

Prior, the US imposed US$200 billion tariff hike from 10 to 25 percent on Chinese goods, since Friday. Furthermore, US President Donald Trump has ordered Trade Representative Robert Lighthizer to give another tariff on the remaining China’ import goods, for around $325 billion. But there is no official decision about it yet.

However, Trump said he would meet with Chinese President Xi Jinping next month and he expected their discussions would be very fruitful, as the trade war between the world’ two largest economies intensified. Both leaders of the powerhouses would meet at a G20 summit in Japan, late June.

China said that US policies are threatening the existence of the World Trade Organization (WTO), setting out a string of grievances in a WTO reform proposal. China did not name the US in the document, but referred to the block on the appointment of WTO appeals judges and national security tariffs on aluminum, steel and cars, policies uniquely associated with Washington.

It also said, that a certain member of the WTO had unilaterally raised trade barriers and imposed import tariffs in an arbitrary way and without authorization from the WTO.

Since entering office, Trump has taken a tough line on the WTO, accusing it of unfairly penalizing US trade while being soft on China, which was a far smaller economy when it joined the WTO in 2001. He has threatened US withdrawal, unless the WTO can shape up and has blocked judicial appointments at the organization’ Appellate Body, effectively the supreme court of world trade, meaning that trade disputes could go into legal limbo from December.

The Beijing threat came out when US was expected to release details about new levies valued at more than $300 billion from all other goods sold by China to the US. Its estimated, China will raise tariffs on around 5,000 products, including animal products, frozen fruits and vegetables, natural honey, herbs and compounds such as potassium sulfate. These products will be taxed at 25 percent.

While for products that are subject to a 20 percent fee, including spices, chemicals and vodka, toothpaste, bleach, related plant equipment such as men’s swimsuits and shoe making machines. The country also responded by raising import levies ranging from LED light bulbs to frozen spinach.

With the backlash, the trade agreement will continue to be hampered, although in April both leaders showed good faith to negotiate and find a point of agreement.

The two countries trade dispute with political ideology and the contrary is impossible to finish just by negotiating at the round table, but rather the political attitude of the two countries to open up and compete in a healthy manner.

The tariff increase announced by Beijing is expected to hit various industrial sectors in the US, ranging from manufacturing and heavy industries to agriculture and household goods.

This is not the first time China has said it will raise tariffs on a list of US goods. Last year, when facing a previous threat, China said it planned to raise $60 billion in export tariffs to China.

On Monday (05/13), Trump warned Beijing not to retaliate against the tariff increase implemented by his government last week and said China would be very hurt if it did not approve a trade agreement.

“I say openly to President Xi and all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China,” Trump said in a written statement.

The tit-for-tat tariff between the US and China has given pressure on the world’ currency. Indonesian Rupiah against Dollar weakened by 0.1 percent yesterday to 14,501. While, shares in companies were seen as possible targets for a further escalation of tariff battles suffered in early Wall Street trade.

Global equities also faced the heaviest fall in 2019, while developing country currencies faltered, amid growing fears about a trade dispute and a direct impact on the world economy. We know, the two countries are not satisfied with the current world order.

The nature of their unhappiness is very different. But the rival ambitions of the two countries have resulted in a trade war that now threatens globalization.

Trump since his election as US President has believed that the world economic system operates is very detrimental to the US. Trump complained that globalism had helped China rise at the cost of the US, thus undermining US prosperity and global excellence.

As for Chinese President Xi, the problem with the current world order is US political and strategic domination. Xi has explained that he wants his country to displace the US as the dominant force in the Asia-Pacific region. Xi supporters of nationalism went further, speaking openly of their hopes that China would become the dominant global power.

Xi is well aware that globalization is very important for China’s rise in the past 40 years. So he is determined to preserve the current trading model.

Therefore, the US and China both have revisionist powers and they also share the power of the status quo. The US has the status quo power on geopolitics, so it has become a revisionist force in the economy. While China is a revisionist force on geopolitics, so it has become a strength of the status quo on trade.

With that, this two-countries’ trade war can be considered as a spark for the real revival of war between the two to fight over the influence of the world economy.

Written by Daniel Deha, Email: daniel@theinsiderstories.com