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Justin Lin's Take on China-US Trade Wars

Jun 03-2019   



To the disappointment of Prof. Justin Lin, one year after his speech on China-US trade wars at NSD Policy Talk, the issue still persists and might even deteriorate. Recently he took to the forum again to share three views.

 

First, trade is mutually beneficial and it's only rational for a country to look at its trade figures with the rest of the world and not just with a single country. The US trade deficit is due to none other than over-consumption and insufficient savings. Raising tariffs can only backfire, as was proved by the escalation of US trade deficit in 2018. The so-called 301 report is more mud-slinging than anything else. Its malevolent actions towards Huawei are just blatant attempts to contain China’s technological innovation and industrial upgrading.

 

Second, if trade negotiations fell through and the US imposed 25% tariff on all Chinese goods, the US might lose 0.3% of growth (out of 2.5% annually) and China 0.5% (out of 6.5%). That would translate into 12% growth decrease for the US and 8% for China. China would remain the biggest contributor to world growth, at around 30%.

Third, in the face of irrational and unreasonable demands from the US, China should first and foremost maintain its composure and follow through on its plans to deepen reform and opening-up and pursue high-quality growth. More opportunities should be given to Europe, Japan, South Korea and other developing countries to share in China’s import market, at more than USD2 trillion per year. 

Justin Lin's Take on China-US Trade Wars

Jun 03-2019   



To the disappointment of Prof. Justin Lin, one year after his speech on China-US trade wars at NSD Policy Talk, the issue still persists and might even deteriorate. Recently he took to the forum again to share three views.

 

First, trade is mutually beneficial and it's only rational for a country to look at its trade figures with the rest of the world and not just with a single country. The US trade deficit is due to none other than over-consumption and insufficient savings. Raising tariffs can only backfire, as was proved by the escalation of US trade deficit in 2018. The so-called 301 report is more mud-slinging than anything else. Its malevolent actions towards Huawei are just blatant attempts to contain China’s technological innovation and industrial upgrading.

 

Second, if trade negotiations fell through and the US imposed 25% tariff on all Chinese goods, the US might lose 0.3% of growth (out of 2.5% annually) and China 0.5% (out of 6.5%). That would translate into 12% growth decrease for the US and 8% for China. China would remain the biggest contributor to world growth, at around 30%.

Third, in the face of irrational and unreasonable demands from the US, China should first and foremost maintain its composure and follow through on its plans to deepen reform and opening-up and pursue high-quality growth. More opportunities should be given to Europe, Japan, South Korea and other developing countries to share in China’s import market, at more than USD2 trillion per year.