The 'guts contest' between the two superpowers, the US and China: Who will 'put down the gun' first?

This move shows that Mr. Donald Trump is ready to "intensify" with China if this country cannot resolve two major problems: the difference in trade balance and intellectual property rights of American businesses operating in China.

US - China: Who will “lay down the gun” first? Photo: New Indian Express

Trump imposes tariffs because China is … “stubborn”

According to the White House announcement, the US will impose a 10% tariff on $200 billion worth of Chinese imports from September 24. The list has been reduced by about 300 items compared to the previously proposed list.

Explaining this move, Mr. Donald Trump said that the US had made very clear demands but China still did not want to change its behavior. A senior official in the US government said clearly: "We have given them one chance after another. Right now, they are still very stubborn."

Mr. Donald Trump has made no secret of his intention to use tariffs to “force” partners like China to make fair deals with the US, asserting that “if countries do not make fair deals with us, they will be taxed!”

But the “change in behavior” of China that Donald Trump mentioned is related to the huge US trade deficit with China and the fact that US companies are forced to transfer technology when doing business in China, thus unable to protect intellectual property rights.

Analysts say Donald Trump's determination is even stronger after statistics showed that China's trade surplus with the US increased to a record level last August, despite some of China's previous commitments to increase imports of US goods.

China's trade surplus with the US in August 2018 reached 31 billion USD, up nearly 3 billion compared to 28.08 billion USD in July and surpassing the previous record of 28.89 billion USD in June.

The new tax was introduced by the US after it imposed a 25% tax on $50 billion worth of Chinese goods. Previously, China retaliated with equivalent value taxes on US goods, targeting agricultural products such as meat, coffee, etc.

With this $200 billion tax package, China also announced that it would not back down against the US. However, US President Donald Trump had also anticipated this scenario when he was ready to activate “phase 3”, imposing an additional tax of about $267 billion on Chinese goods from January 1, 2019.

If the US takes this step, China will no longer have a chance to "race" with the US because this number is higher than the total amount of US goods exported to China.

Currently, the volume of Chinese goods imported from the US is only one-quarter of the $506 billion worth of Chinese goods exported to the US market annually.

Analysts say that once the US-China trade war reaches the “hundred billion USD” level, China will have to use weapons other than tariffs, possibly by restricting Chinese companies from selling materials, equipment and important spare parts to US companies.

It is difficult for both sides to "retreat"

The decision to impose tariffs on $200 billion worth of Chinese goods will negatively impact high-level trade talks between the two countries scheduled to begin this week in Washington, possibly even derailing the negotiation plan.

If it goes as planned, this will be the 5th round of negotiations with the Chinese delegation headed by Vice Premier Liu He and the US delegation headed by Treasury Secretary Steven Mnuchin.

Although US President Donald Trump is determined to escalate tensions with China to gain an advantage at the negotiating table, analysts say it is difficult to expect positive developments in the trade confrontation between the two powers, because the current situation hardly allows either side to retreat first.

US President Donald Trump calls on China to end unfair trade. Photo: AP

Trade relations between the US and China began to tense when President Donald Trump announced new tariffs on aluminum and steel imported from China last March.

Since then, the two sides have continued to “retaliate” with each other, bringing the amount of goods each side has to pay tariffs to more than $50 billion. Senior officials from both sides have met four times in formal negotiations but have yet to produce any significant results.

Explaining the lack of progress in US-China negotiations, many people believe that an important factor is that the US - the party that initiated the tariffs - is not under pressure to reach an agreement with China.

With the motto "America first" that President Donald Trump has put forward since his election campaign, it is undeniable that the $375 billion trade deficit with China is a noteworthy number.

But the deeper reason behind Donald Trump's decisions is the concern about China's rise as a superpower, surpassing the US's position in the industries of the future, such as self-driving cars, artificial intelligence, aerospace... that China has mentioned in the "Made in China 2025 Initiative" program.

Many analysts believe that Donald Trump's decisions represent a change in thinking within the US government, from shaking hands and harmonizing to containing China.

Meanwhile, on the other side, China is also unlikely to let the US stop its goal of entering the industries of the future. That is why China has always declared that it will not back down from the US and will “not negotiate with the US with a gun to its head”.

World public opinion is waiting to see how China's declared toughness will be demonstrated, first of all, whether the plan to send a high-level negotiating delegation led by Vice Premier Liu He to the US this week will change or not.

It can be said that the current trade confrontation between the US and China is not only an economic confrontation but also a competition for influence, power and position in the new world order. Politics is the factor that makes it difficult for both US President Donald Trump and Chinese President Xi Jinping to "retreat" first in the current confrontation.

Now both are betting on their calculations: The US thinks China will be hurt more by the tariffs, so China will back down first.

Meanwhile, China believes that the wave of protests from the American people and businesses will discourage Donald Trump. And it is difficult for anyone to predict the outcome of this “test of courage” between the world’s number 1 and number 2 economic powers.