Why China Cannot Win a Trade War Against the USA

“China has few if any companies that supply technology inputs to U.S. companies that America either doesn’t produce or cannot buy from friendly nations.”i

“Analysts reckon China is more than 10 years behind in designing high-end logic chips of the kind used in Huawei’s switches and routers”ii

Speaking at a rally in Florida in May 2019, United States President Donald Trump told his supporters, “We won’t back down until China stops cheating our workers and stealing our jobs. And that’s what’s going to happen. Otherwise, we don’t have to do business with them. We can make the product right here, if we have to, like we used to.”

On June 1, US customs began collecting a 25 percent tariff on $200 billion of more than $500 billion of Chinese goods arriving in US ports annually. Trump is also threatening tariffs on the remaining goods. China responded by increasing its own tariffs of between 5 percent and 25 percent on almost all of its annual $120 billion of US imports.

Perhaps even more significantly, the US added Huawei, the Chinese multinational corporation (MNC), to the Department of Commerce “entities list” with which US companies are prohibited from doing business without departmental permission. Among other things, the ban means Huawei can no longer offer Google applications such as Gmail, Google Maps and Play Store on its phones, nor purchase US- and British-designed microprocessors needed to produce high-end phones and telecommunications equipment. There is widespread speculation that these two issues alone will gravely undermine Huawei’s market position – at least outside of China. The Trump administration has threatened five other Chinese technology companies, including Hangzhou Hikvision, a leading global supplier of security cameras, with inclusion on the entities list.

In doing this, Trump has spread the so called “US-China trade war” well beyond just tariffs. China has responded in kind, announcing its own Unreliable Entities list – which may include companies complying with the US Commerce Department’s bans. This would include some of the biggest and most powerful companies in the world, such as Google and leading microchip companies like Qualcomm, Intel and British-based ARM, which do a considerable share of their global business in China, or companies making products that are assembled in China.

Chinese garment workers

Popular Support for Trump’s Trade War

While the markets are in a spin and neither the terms nor outcomes of this latest stage are clear yet, what has long been clear is the widespread popular support Trump has for attacking China. US Senator Bernie Sanders, who has long advocated a protectionist stance similar to Trump’s, recently attacked rival Democratic presidential nominee Joe Biden for being soft on China. He promised a Sanders administration would best lead the U.S. struggle against China, tweeting, “It’s wrong to pretend that China isn’t one of our major economic competitors” and “When we are in the White House, we will win that competition by fixing our trade policies”.iii Supporting Trump’s contention that US manufacturing job losses are principally caused by China, Sanders tweeted, “Since the China trade deal I voted against, America has lost over 3 million manufacturing jobs”. Besides Sanders, Trump enjoys bipartisan support for his trade policies on China.

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