25 August 2018   Leave a comment

The escalation of tariffs between the US and China reflects a profound difference of opinion by each side about which side is more vulnerable.  The US has raised its tariffs largely because if believes that China is more dependent on US products than US consumers are on Chinese products.  If one looks at the total trade balance, one would suspect that this vulnerability indeed exists.  In 2017 the US trade deficit with China was $375 billion: “The trade deficit exists because U.S. exports to China were only $130 billion while imports from China were $506 billion.”  In an interview with CNBC on 22 August, US Secretary of Commerce, Wilbur Ross, said:

“They are not going to give that up easily.  Naturally they will retaliate a little bit, but at the end of the day we have many more bullets than they do.  They know it.  We have a much stronger economy than they have.  They know that, too, and the thing they have been underestimating is how patriotic the Americans, including the ones who have been hit with retaliation really are.  They’ll know pretty soon.”

Interestingly, China believes the exact opposite.  From the Asia Times:

“China knows the US has many more bullets? Chinese tech behemoth Ailbaba’s vice chairman, Joseph Tsai, didn’t get the memo. Speaking to analysts on the company’s quarterly earnings call, as reported by Business Insider on Friday, Tsai said he is not concerned about the trade war.

“’This coming November, China will hold the world’s largest import exhibition in Shanghai that will showcase products from all over the world,’ Tsai said. ‘If US goods become too expensive due to tariffs, Chinese consumers can shift to domestic producers or imports from other parts of the world.’

“Others quoted in the article agreed. Xiaojia Zhi and Helen Qiao, China economists at Bank of America, said they are already seeing the shift.

“’We believe the Chinese government has more influence on how much and where to buy its imports than the US government’s influence on its own importers,’ the economists wrote in a note to clients. ‘In other words, China could shift its imports from the US to purchases from other markets relatively more easily than the US administration pushing businesses to other alternative countries for outsourcing or imports.’”

This fundamental difference in perceptions is not something that is easy to dismiss.  Indeed, these perceptions are deeply rooted in the historical memories of both countries, and reflect the belief in the exceptionalism of both.

 

The US has announced that it will cut a further $200 million from planned humanitarian assistance to Palestinians in the Gaza Strip.  In so doing, the US has cut off all pretense of being an honest broker between the Isarelis and the Palestinians, a trend that has been evident since the election of President Trump.  President Trump’s decision to recognize Jerusalem as the undivided capital of Israel destroyed whatever faith the Palestinian leadership may have had in negotiations and the US decision to cut off aid to Palestinian refugees through the the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA).  But the move to cut off humanitarian aid now makes explicit the US belief that the Palestinian people are legitimate pawns in the effort to buttress the Israeli claims to all the entirety of the Occupied Territories.

Posted August 25, 2018 by vferraro1971 in World Politics

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