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Monday, December 5, 2022

US/CHINA TRADE WARS #390

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Mr Graham Perry
Graham Perry
Experienced Arbitration Lawyer | China & Chinese Business Affairs | Public Speaker/Lecturer.

GOOD MORNING FROM LONDON

According to data from the US Census Bureau, the value of US imports of Chinese goods in January/February 2022 has returned to pre-pandemic levels as has the trade deficit which grew by 14.5% to reach US$355.3bn in 2021. Most economists accept that tariffs are ineffective but 71% of Americans have continued to support a trade war against China.

President Trump started the trade war when, macho-style, he imposed an additional 25% import tariff in 2018. But Chinese manufacturers have dodged the increased tariffs by changing the “country of origin” eg from Made in China to Made in Vietnam eg Massachusetts-based 3D-printer manufacturer Formlabs Inc.

A Vietnamese factory assembles solar cells/solar glass imported from China into solar panels. The final assembly operation can qualify as a “substantial transformation” so that the factory can declare Vietnam as the country of origin for the panels. Similarly, American firms have labelled their Chinese imports as coming from Mexico which attracts no import tariff under the US-Mexico-Canada agreement.

Politicians flex their muscles when imposing tariffs. Elections approach. Scapegoats are needed and tariffs are applied. It goes down well with the electorate but it does little or nothing to arrest the rise of China. It is the same with “de-coupling” – a policy designed to bring China to its knees as one-by-one Western companies are encouraged by politicians to turn away from China. They may land the occasional blow but at the end of the day, Business outflanks Politicians. Ingenuity goes to work. Trade continues. Investment continues. Business grows.

The #1 issue remains the inexorable rise of China. It challenges US self-esteem, US pride, and US focus. This is nothing new in History. It has been the same down the centuries as

Powers rise and fall. But each Power believes it is different – that they can arrest the march of time – that they can maintain their leading role. It takes wise leaders to avoid conflict. How confident can we be that such leaders exist in the US?

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