China has “Three Winning Cards” against US, says expert

BY SILVI WRITER and BBC

A leading US expert in China has said Beijing has “three winning cards” against Washington, while one of Donald Trump’s top economic advisers has acknowledged the president was wrong to suggest that China would pay tariffs on its exports to the US.

Larry Kudlow, who heads the National Economic Council, accepted it was US businesses that paid the import tax.

Larry Kudlow
Larry Kudlow

He told Fox News that he believed “both sides will suffer” from the escalating trade dispute.

On Friday Trump tweeted that tariffs on $250bn of goods coming into the US were being paid “by China”.

The president argued there was “no need to rush” into a trade agreement with China, as the US Treasury was benefiting from these “massive payments”.

However, in an interview with Fox News Sunday, Kudlow admitted that it was American businesses that paid the tariffs on any goods brought in from China, and that US consumers would also foot the bill if firms passed on the cost increase.

Kudlow said he thought the tariffs would also have an impact on China’s economy, as the higher cost would reduce US demand for Chinese goods.

“Both sides will suffer on this,” he said.

Last year the US imposed a 10 percent tariff on $200bn worth of Chinese products – including fish, handbags, clothing and footwear.

The firms paying the additional tariff can choose to absorb it themselves, pass it on to consumers in the form of higher prices, or ask their suppliers to reduce their prices.

Last week the US said it was increasing tariffs from 10 to 25 percent on $200bn of goods from China. Trump said Beijing “broke the deal” by backtracking on earlier commitments to change its policies.

Despite two days of negotiations in Washington last week there is no indication that the two sides are any closer to resolving their differences.

The US argues that China’s trade surplus with the US is the result of unfair practices, include state support for domestic companies. It also accuses China of stealing intellectual property from US firms.

China has responded saying it will not swallow any “bitter fruit”. The commentary is due for publication on Monday in the ruling Communist Party’s People’s Daily.

“Three Winning Cards”

Jin Canrong, one of China’s most prominent US expert, said on Saturday that Beijing has “three winning cards” against Washington.

Jin Canrong
Jin Canrong

The first one would be China’s “total ban” of rare earths export to the US, the professor with the Renmin University of China said.

China accounts for over 95 percent of the world’s production of rare earths, which is essential for making chips.

“If China totally bans rare earths export, the US cannot produce many things. It will then be forced to extract its own rare earths, which may take several years to meet its own need. Then China will have time to make its own high-end chips for export,” he said.

China’s second winning card is its $2 trillion of US government debts, Jin said.

The third winning card is the Chinese market for US companies, he added.

US companies earned more than $380bn in the Chinese market, while Chinese companies cashed in only $20bn in the US, according to Jin.

“If Beijing asks for equal market access for companies in both countries, the US won’t be able to sell that many goods in China,” he said.

Sales revenue of Apple, for example, totaled $46bn in China, making it the company’s second largest market, only behind the US.

China is “completely capable” to bring its market share down to zero, Jin added.

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