The global economy would be severely impacted if the trade dispute
between China and the United States turns into a cycle of widespread
actions and counteractions, economists said on Wednesday.
Their responses came after the US Commerce Department announced on
Tuesday it was starting new investigations to determine if certain steel
wheels from China are dumped in the US and whether manufacturers in
China are receiving subsidies.
The US government on the same day also made a preliminary
determination that aluminum sheet imports from China are being
Maurice Obstfeld, economic counselor and director of research at the
International Monetary Fund, said that major economies are flirting with
a trade war at a time of widespread economic expansion may seem
paradoxical, especially when the expansion is so reliant on investment
“Particularly in advanced economies, public optimism about the
benefits of economic integration has been eroded over time by
long-standing trends of job and wage polarization, coupled with
persistent subpar growth in median wages. Many households have seen
little or no benefit from growth,” Obstfeld said.
“These trends are more due to technology change than to trade,” he said.
The IMF forecasts that recent US policies will actually widen the US
trade deficit. It expects the US current account deficit for 2019 to be
roughly $150 billion higher, considering the US tax cut and spending
changes effective in the past months.
“The Trump administration must broaden economic scales via
investments in people and enhancing people’s sense of security to adapt
to impending technological changes, rather than advancing trade
tensions,” said Wei Jianguo, former vice-minister of commerce.
Wei said the US is trying to form alliances with the European Union
and Japan to further suppress China’s manufacturing, which has been
boosted by the Made in China 2025 strategy. But he said those two other
economies must be aware that the US doesn’t want to see any other
country have a technological advantage in modern manufacturing because
that would affect its global dominance.
“They will be the next targets after China if they follow the US’s mistaken stance,” Wei said.
US has begun to attack China’s high-tech manufacturing because it
thinks that will damage the Chinese economy, said Dong Yan, director of
the International Trade Office at Institute of World Economics and
Politics at the Chinese Academy of Social Sciences.
The US Federal Communications Commission voted unanimously on Tuesday
to ban federally subsidized telecom carriers from using suppliers
deemed to pose a risk to national security. The move targets Chinese
tech leaders Huawei Technologies Co and ZTE Corp, two names that
appeared in the FCC’s order.
Though the ban needs a second FCC vote to take effect, it highlights
once again that Chinese tech players are finding it increasingly hard to
access the US market, said Bai Ming, a researcher at the Ministry of
“After protectionism in trade, the US government is using national
security concerns as a tool to exclude Chinese tech players and protect
its domestic tech industry,” Bai said.
This comes as China and the US are scrambling for the top spot in the
high-tech sector. The US government feels threatened as Chinese tech
firms emerge as innovation pioneers, Bai added.