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US threatens more tariffs as China surplus soars
September 8, 2018, 4:55 pm
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Latest customs data from the United States shows that in August, China’s trade surplus with the US widened to a record US$31.05 billion, up from the $28.09 billion in July. The new figures are likely to further exacerbate the ongoing tetchy trade dispute between the two countries.

The data out in August is in line with figures that show China’s surplus with its largest export market rose by nearly 15 percent in the first seven months of 2018. Analysts worry that the consistent surplus not only adds more fuel to tensions in the trade relationship between the world’s two largest economies, but also threatens global trade at a time of nascent economic recovery.

In July, US President Donald Trump imposed customs duties of up to 25 percent on $34 billion worth of Chinese goods, and followed this up in August with tariffs on another $16 billion worth of Chinese goods, mostly industrial machinery and intermediate electronic parts, including semiconductors. This led to retaliatory tariffs by China on US goods of an equal amount.

President Trump upped the ante last week by threatening to slap tariffs on nearly all Chinese imports to the United States totally around $500 billion. He said that in addition to the $200 billion in imports that are set to face tariffs in the coming days, he could also add another $267 billion worth of goods in near future.

China has promised to retaliate in equal measure while also pursuing a case against the US with the World Trade Organization. But there is not much that China can do by way of tariffs on US goods as Chinese imports from the US are less than $200 billion a year relative to the $500 billion it exports to the US.

But China’s humongous trade surplus are only one part of the US gripe and President Trump’s subsequent tariffs, Washington has long criticized Beijing over restriction placed on US firms’ access to Chinese markets. In addition, the US has also accused China of weak intellectual property protection and the mandatory technology transfers and investment that US firms have to undergo in order to operate in the Chinese market.

Despite the US tariffs in place for the first full month in August, China’s export to the United States accelerated, growing 13.4 percent from a year earlier. In the same period, China’s imports from the United States grew only 2.7 percent in August, a slowdown from 11.1 percent in July. Economists agree that tariffs will take time to be reflected in broad economic data and corporate earnings reports and that the tailwind behind rise in Chinese exports could be explained by the rush from Chinese manufacturers eager to export their products before full impact of the tariffs begin to take effect.

But the large bilateral surplus is also indicative of a US economy that is robust and a Chinese one that is weakening. In recent months, belligerent trade dispute with the US and its potential escalation, cooling domestic demand and softening investments at home have all combined to take a toll on the Chinese economy.

According to official and private manufacturing surveys, global demand for Chinese goods is clearly on the wane, with export orders shrinking for the last several consecutive months. To stem the impact of trade troubles with the US, lackluster exports and flagging domestic demand, Beijing is attempting to ramp up spending on infrastructure projects to spur market activity and improve domestic demand.

Policymakers have also increasingly focused on improving credit conditions and shoring up business confidence. The central bank is also instituting policies to lower borrowing costs while cajoling commercial lenders to continue lending to firms struggling with exports and tariffs.

But experts warn these steps are unlikely to stem the economy’s slide unless the government can come up with strong stimulus measures designed to shore up the economy and directly lend support to businesses.

 

 

 

 

 

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