Recently, the main topic of interational media is the trade war of President Donald Trump with countries around the world. The United States, which after winning of the Second World War, were the main architect of the world’s economic and financial system, now are not satisfied with the system, they have created themselves. The economic structure created within the framework of the World Trade Organization (WTO), based on the principles of global trade and freedom of navigation, causes that the United States in such system begins to lose advantage at the expense of other countries. The US economy and the US industry are not able to compete with the industry of countries that, thanks to low costs, produce cheap products and export them to the world. The United States is trying to stop this process and establish conditions that will be beneficial to US industry and the economy.
Last week, on Thursday, we should have found out details of US import tariffs on chinese products worth nearly 60 billion dollars. Before the press conference, in the context of US investigation into China’s violation of intellectual property, US may consider imposing tariffs on chinese technology and telecommunications products. President Donald Trump on Thursday, signed a memorandum, which gives a 30-day period for consultations on the preparation of a list of Chinese products to cover possible tariffs. It is clear that both disputed parties have not reached any preliminary agreement and need additional 30 days for possible talks to reach a compromise.
In response to this move, the Chinese Ministry of Commerce proposed a list of 128 products imported from the United States as a potential retaliation target for the earlier announced import duties on steel and aluminum. On American goods value on USD 3 billion in 2017, might be impose chinese tariffs, including wine, fresh fruit, dried fruits and nuts, steel pipes, modified ethanol and ginseng. These products could be subject of 15% duty, while a 25% duty is considered to be applied to American pork and processed aluminum products. American agricultural products, in particular soybean, have been designated as the largest area of potential retaliation by the Chinese administration.
In this trade war leds by the administration of Donald Trump, I personally feel that the United States is generally on a lost position. The globalization process has gone to far, to turn it back.
The main argument for failure is only the United States is interested in changing the existing trade rules. China, which is the main beneficiary of the current global economic system, sets strong conditions in negotiations and threatens with possible retaliatory measures. The strength of the Chinese economy, which is currently number one in terms of purchasing power parity, has grown due to the fact that China has become a world’s factory.
The European Union, more Germany, also does not want changes. The President of the European Commission Jean-Claude Juncker said that the European bloc is prepared to respond strongly to the threat posed by the imposition of US duties on steel and aluminum. In this situation, the European Union, on Friday, obtained an exemption from US duties on terms such as Canada and Mexico, ie until 1 May 2018. Argentina, Australia, Brazil and South Korea also joined the group of countries excluded from tariffs on steel and aluminum. Until May 1, further trade negotiations are to take place, whatever that means. In addition, the European Commission plans to impose a 3% tax on the revenues of large internet companies, which will mainly hit such American technology companies as Google, Facebook and Amazon.
The lack of setting conditions favorable to the United States and further extension dates of talks can only indicate that Donald Trump’s administration is powerless to enforce its national interests. A few days ago, Steven Mnuchin, Treasury Secretary, said that the United States would consider re-entering the TPP project if they achieved their goals in talks with China and the NAFTA agreement. However, if we assume that Donald Trump’s administration failed in these talks, is not joining to the TPP project the last resort?
Any escalation of the global trade conflict will not be good for the United States, it may only worse the present fatal situation and even cause a fall of American state soon. The further threat of imposing subsequent tariffs by the Americans leads to the rapprochement of countries against which these threats are addressed. President Donald Trump loudly talked about the need to reduce the trade deficit that occurs with China and Germany. The leaders of both countries in a joint conversation admitted the need to deepen strategic cooperation between the two countries. The President of China, a few years ago, announced the idea of resurrecting the ancient Silk Road, which was a bridge connecting Europe and China in trade. The main sell market for Chinese products is in Europe. If China decides to impose tariffs on the aforementioned American pork, this will result in a rapid increase in pork demand … from Europe, whose imports have already increased enough due to the imposition of sanctions on Russian pork. The strategic partnership between Europe and China will deepen, the American economy will only lose on it.
One of the areas in which the United States can succeed is to sell US liquefied natural gas (LNG) to China. The growing economy of the Middle Kingdom is facing an increase in demand for electricity as well as the growing needs of household heating. In addition, China has a huge problem with air pollution, so obtaining energy from clean sources will be a priority. In 2017, the United States exported more LNG than it imported, which makes it a net exporter of this raw material. The American eldorado of obtaining shale gas leds to the worlds overproduction of gas, which has caused a drastic fall in the prices of this raw material on global stock exchanges. Thanks to such low natural gas prices, its use in production as energy resource should increase.
In an interview with Bloomberg, The Secretary of Trade – Wilbur Ross said that China should buy more American liquefied gas, which could reduce the trade deficit. The reduction which President Donald Trump so urgently calls for. China is already the third largest importer of the American LNG, just behind Mexico and South Korea. In February of this year, Cheniere Energy Inc. became the first American gas exporter to sign a long-term contract with China, committing to delivering 1.2 million metric tons of gas per year, by 2043 to China National Petroleum Corp.
Due to the increased sales of liquefied gas to China, the United States would reduce the trade deficit, and more importantly, would maintain the petrodollar system. International trade is based mainly on the US dollar settlement system, i.e. if for example Polish PGNiG wants to buy gas from Qatar, to settle this transaction, the Polish company must buy American dollars and then pay to the company from Qatar in US dollar. This leads to artificially pumped demand for US dollars, the currency of the United States is in privileged situation. However, the countries of the BRICS group, which includes China, try to depart from the principle of settling international transactions in US dollar, because it is burdensome and disadvantageous from the point of view of these countries. For this purpose, contracts on crode oil will be launched soon denomineted in Chinese yuan, but i will write about that later.
Without a doubt, we entered the period of great geopolitical changes in the world. After the collapse of the Soviet Union accustomed to the unipolarity , we should wake up from a dream in which the United States was responsible for stability and security in the world. When the United States set the rules of the game. Unnoticed on the principles set by the Americans, China has grown in such matter that they begin to undermine the hegemony of the United States and try to pursue their own policy, not necessarily coincident with the American one. Will this uprising of the United States, aimed at stopping the development of the Middle Kingdom and maintaining its role as a hegemon, will be a success? Is it too late? The time will tell.