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Young Minds of C3S Dialogue on “Sino-U.S. Tariffs Issue”

Zhu Guangyao, China’s Vice-Finance Minister at a press conference on Sino-U.S. trade issues at the State Council Information Office, Beijing, April 4, 2018. Image Courtesy: AP/The Hindu

Article No. 024/2018

The following is text of a virtual dialogue conducted by Members of Young Minds of C3S. The theme revolved around the article ‘China slaps retaliatory duties, strikes at signature U.S. exports’, The Hindu (vide http://www.thehindu.com/news/international/china-slaps-retaliatory-duties-on-us-soybeans-planes/article23435238.ece/amp/).

S. Shashank, 4th year, B.A. LLB (Hons.), Tamil Nadu national law school, Tiruchirappalli & Intern, C3S

It was definitely a mistake of Washington D.C. in not accessing redressal mechanisms under the WTO, when decided to unilaterally impose tariffs on Chinese steel and aluminum imports into the US. China and U.S.A. are the biggest trading partners and both of them stand to lose in this trade war. However China can definitely garner better support in this case from other countries owing to Trump’s protectionist policies and its choke on free trade.

Since this trade war can affect global stock markets, it is in the best interests of every country to have this dispute settled amicably.

Asma Masood, Research Officer, C3S & President, YMC3S

Is U.S.A  justified, to an extent, while imposing tariffs on China’s high technology goods that could be detrimental to the interests of American manufacturers?

S. Shashank

First of all, it is a clear calculated move by the Trump government. It imposes tariffs on imports from specific countries and exempts certain others. China being a producer of 50% of the world’s steel will definitely feel the impact. The legal validity of the tariffs can be dubious.

Second, the US always has recourse available in the form of the World Trade Organization (WTO). U.S.A’s trade policy has been increasingly characterized by aggressive unilateralism rather than a rule based approach under Trump. The US must have referred to the adjudicatory body and negotiated with China before imposing these measures.

Asma Masood

Uday, as an intern at C3S, you are currently researching economic concepts related to the theme ‘Dynamics of China’s Economic Dependence on India as a Deterrent to Conflict’. Are there any parallels you can draw on the Sino-U.S. tariff issue with your work?

Uday Khanapurkar, B.Sc. Economics (Hons.), Symbiosis School of Economics, Symbiosis International University, Pune & Intern, C3S

Trade wars certainly defy conventional economic wisdom. However, geopolitical interests are not necessarily consistent with economic ones even though they find their base in them. Should a trade war ensue (it has not happened yet, both nations-U.S.A. and China- are still posturing), the real question will be which of them stands to lose more. This is where the market structure of international trade comes into the picture. China’s list of tariffs is more diverse and they can substitute lost American imports from other nations. China is also adroit at moulding its domestic demand (recall the Japanese goods boycott in 2012). The Americans may find it tougher to substitute cheap Chinese electronics. Perhaps this could explain the surprise over China’s quick response? This is to say that market structure and asset specificity will be the metric by which to assess the relative losses rather than dollar values. That being said, one feels that both China and the US are still posturing in that tariff lists are likely to have been designed to ensure a degree of substitutability. USA is likely hoping that the threat of a real trade war will force a bargain on tech transfers and such.

India should keep its eyes peeled for possible supply chain migration that could take place in the event of a disruption.

Asma Masood

What should India do in event of a possible supply chain migration?

Shalini, 2nd year Masters Programme of Public Policy, National Law School of India University, Bangalore & Intern, C3S

One needs to delve into the aspects which are going to affect India in the long run taking into consideration our membership under General Agreement on Tariffs and Trade (GATT).

Even if the Trump administration has said that the steel and aluminum tariffs are necessary to protect their national security, U.S.A’s action is breaching the WTO rules. This challenges the entire existence of WTO as a relevant tariff regulatory agency.

One questions whether India is one of those specific countries upon which import tariffs had been imposed?

Uday Khanapurkar

It is, although a waiver has been requested.

Asma Masood

An interesting pattern is seen. On one hand China is disregarding international laws on maritime issues. USA is putting WTO norms on the backburner in this case. One is a rising power, another is a great power. We shall have to wait and watch for the long-term implications of such selective indifference to international rules.

(All views expressed in this dialogue are the members’ own.)

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