It is a real trade war now.
Beijing responded to Donald Trump’s “Liberation Day” on Friday, Beijing on Friday Slap your own 34% prices on all American imports, corresponding to the new reciprocal tax rate Imposed by the American president on Wednesday. The prices come into force on April 10, a day after Trump’s prices.
The news has shook an already frightened American market, sending the S&P 500 almost 6% lower on Friday. Boeing – Who Once provided a third of his 737 planes in China – exceeded by more than 9%. Chinese companies listed in the United States also poorly performed, the Nasdaq Golden Dragon China index falling by around 9%.
The collapse of the American markets followed a continuous decline in Asia, which brought the weight of Trump’s “Liberation Day” prices. The Japanese reference index Nikkei 225 is now down 5.2% during the two days of negotiation since April 2. Kospi from South Korea is down 1.6% over the same period. The NIFTY 50 of India dropped by 1.8%. (Perhaps fortunately, the Chinese markets, including in Hong Kong, were closed for the Qingming festival, or “tomb sweeping day”))
However, beyond the reactions of the market, the reprisals of China increase the possibility that Trump’s prices – despite the claims of his supporters according to which the countries would adapt to new taxes, to hurry with the negotiation table to offer concessions – will send the world in a long period of protectionism.
“Rather than fixing the rules of which certain American trade partners have benefited from their own advantage, Trump has chosen to explode the system governing international trade,” said Eswar Prasad, principal professor of trade policy at Cornell University. “He took the ax of ax to trade with almost all the major American trade partners, sparing few allies or rivals.”
And now the world faces a trading system without a clear leader. Some countries will try to offer concessions to the United States, others will try to create new business links with other savings – and some are now seeing an opportunity to take advantage of relatively lower rate rates to take market share of competitors.
“The era of globalization and free trade based on rules is over. We are entering a new phase, more arbitrary, protectionist and dangerous,” said Singapore Prime Minister Lawrence Wong A video statement Released on Friday.
“Global institutions are weakening; international standards are growing. More and more countries will act according to close personal interest and strength or pressure to make their way.”
To what extent will an effect have prices?
The Trump administration has imposed large prices, often well above the basic line of 10%, in the Asia-Pacific region. Southeast Asia has been the hardest, Cambodia and Vietnam obtaining rates of 49% and 46% respectively. China obtained a rate of 34%, in addition to the previously announced prices of 20%. Other Eastern Asian savings such as South Korea, Taiwan and Japan, have obtained prices between 24% and 32%. Only a handful in Asia -Pacific – Australia, New Zealand and Singapore – designed the basic line of 10%.
Goldman Sachs degraded GDP forecasts Thursday through Asia-Pacific, Vietnam obtaining the largest blow, falling to 5.6%, a complete percentage of 1.5 percentage point of its previous projection. Taiwan, which obtained a rate of 32%, also took a big blow in the bank’s forecasts, lowering a percentage point at 1.6%.
HSBC estimated that 54% of tariffs on China – the current level imposed by Trump – could lead to the growth of China’s GDP of 1.5 percentage points, against its previous projection of 4.8%.
Analysts do not expect other Asian-Pacific countries to copy China trying to counter Trump’s prices.
“Most other countries will resist the urge to intensify,” said James Laurenceson, director of the Australian Institute of China Australian Sydney China. “Most Asian countries remain of the opinion that open trade is good for prosperity and security.”
He adds that “the atmosphere in Australia is a disappointment, but if the United States wants to engage in autumutilation, the best strategy is not to react by also committing in self-harm.” (Australia said He will not retaliate at the new price of 10% of Trump).
“South Korea will probably offer more concessions”, such as participation in Gas projects in Alaska Or buy more American agricultural products, suggests Ramon Pacheco Pardo, expert in international relations and expert in Korea at King’s College in London.
On Friday, US President Trump said that Vietnamese officials had proposed to “reduce their prices to zero”. The countries of Southeast Asia had previously proposed To reduce rights to American imports. Cambodia has also offered to reduce prices to a range of imports to 5%, depending on the local point of sale Khmer times.
Savings can also offer domestic support, such as the announcement of Taiwan de $ 2.7 billion Local manufacturers injured by Trump prices.
But the United States will probably not be able to eat in economic primacy in the region, suggests Van Jackson, lecturer in international relations at Victoria University of Wellington and author of The danger of rivalry: how great power competition threatens peace and weakens democracy. “The United States has gradually alienated Asian economic realities. America, in other words, does not have the cards to do what it is trying to do,” he said.
What happens when nobody is trade?
For decades, the United States was at the center of the so-called rules based on rules, supporting institutions such as the World Trade Organization and taking advantage of its consumer market. While the American commitment to free trade has never been so strong as its rhetoric suggested it, the “Liberation Day”, by bringing the tasks to a level not seen since the 1930 Smoot-hawley pricesNow has clearly left the world trading system without leader.
“What the United States does now is not a reform. It abandons the entire system on Friday,” said Singapore Prime Minister.
It could be risky. “A world where the hegemon abandons the maintenance obligations of international orders and is just in pure mode of breeding and wealth is a danger for itself and for others,” explains Jackson.
The fault lines are already beginning to be traced.
The Philippines, who obtained a relatively indulgent rate of 17%, considers the “Liberation Day” as an opportunity to gain market share of its neighbors. The country of Southeast Asia is impatient to strengthen its exports of chips, electronics and coconuts to the United States “We will certainly benefit from the lower rates,” said Minister of Commerce Cristina Roque A bloomberg TV interview Friday morning. “Now that our prices are lower than [competitors like Thailand]We will probably have a stronger advantage. “”
Another possibility is that Asia establishes new trade relations, whether internally or with other developed markets in Europe or the Middle East.
“Faced with both limited access to American markets and demand from American consumers due to Trump prices, the rest of the world will seek to export market diversification, trade arrangements that exclude the United States and other approaches to buffer against an imminent world trade war,” suggests Prasad.
This is true in China, already trying to build its links with the world South. Beijing “encourages more companies to go abroad”, which can lead to a “short -term increase in exports”, explains Dan Wang, director of the Chinese team of the Eurasia group. “As soon as you establish factories abroad, they must import machines to install these factories.”
Economists have already expressed concerns about a cascade rate In response to a potential flow of Chinese products.
However, Wang thinks that there will be no “universal decline” for Chinese goods. She suggests that the “pillars industries” like cars or green energy could stimulate the “strong decline” of foreign governments. But in the end, “China is a large producer. It provides goods that cannot really be replaced by another country, or even a combination of other countries. ”
And Beijing can gain congratulations by being a relative bastion of stability, at least compared to Trump.
“In the short term, China can collect the fruit of low public relations and collect easy victories by appearing stable, reliable and simply by doing what the United States does,” said Austin Strange, professor of international relations at the University of Hong Kong.
This story was initially presented on Fortune.com
