What is the purpose of US' trade actions? - Arthur Kroeber

Arthur Kroeber

Most observers of the recent trade actions by the US have been left behind flabbergasted, says leading economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know® to CNN. While the rhetoric is firmly anti-Chinese, most damage is done to other countries than China. Although that could change, he adds.

CNN:

The bigger concern for China is whether Trump will soon come out with other measures that target it more heavily and directly. That could result from an investigation into Chinese efforts to get hold of U.S. intellectual property that was launched last year by Trump's trade czar, Robert Lighthizer. 

"Behind the scenes, the U.S. administration appears to be preparing a more focused campaign directed against China," said Arthur Kroeber, a founding partner at economic research firm Gavekal. 

If Trump comes down harder on Beijing by slapping tariffs on a broad range of China's exports and clamping down aggressively on Chinese investment in the U.S., President Xi Jinping will fire back, experts say... 

Trump's argument that the steel and aluminum tariffs are justified on grounds of national security may have given Chinese leaders another avenue of attack. 

"By using a national security justification for protection that obviously serves no real national security purpose, Trump opens the door for other countries -- notably China -- to use the same justification to protect their own industries," Kroeber wrote in a note to clients. 

Trump's latest move also helps China deflect widespread criticism of its own trade practices, which include subsidizing key industries, dumping excess production of a product such as steel on global markets and shutting out foreign companies and investors from huge swathes of its economy. 

"Although Trump and his trade advisers consistently claim that China is the main villain in international trade, these tariffs make it far harder to organize resistance to Chinese bad behavior," Kroeber said. 

The metal tariffs could end up doing the most harm to U.S. allies like South Korea, Japan, Germany, Taiwan and Brazil. 

Most of those governments "would have been quite happy to join in U.S.-led efforts to restrain Chinese mercantilism and fight for greater market access in that highly protected economy," Kroeber wrote. "Now they will be inclined to wonder whether it is really China or the U.S. that poses the greater threat to the world trading system."

More at CNN.

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