US-China Trade War Could Impact Trump Electorate - Professor

© AP Photo / Pablo Martinez MonsivaisU.S. President Donald Trump, second right, and China's President Xi Jinping, second left, attend their bilateral meeting at the G20 Summit in Buenos Aires, Argentina.
U.S. President Donald Trump, second right, and China's President Xi Jinping, second left, attend their bilateral meeting at the G20 Summit in Buenos Aires, Argentina. - Sputnik International
American firms suffer from a trade war with China. During the public hearings on the possibility of introducing new tariffs on Chinese goods, which began in the US International Trade Commission this week, many US companies are speaking out against the escalation of the trade war.

They say there is simply nothing to replace many Chinese products. And even those American manufacturers, who produce finished goods in their homeland, still depend on Chinese suppliers.

Apparently, so far there is no talk about softening of tariff barriers on both sides. US Secretary of Commerce Wilbur Ross said that even if the meeting of the leaders of the two countries on the sidelines of the G20 summit in Osaka takes place, we can hardly expect an early trade agreement. At best, according to Ross, the parties will agree to resume bilateral negotiations.

And at worst – the meeting may not take place at all. Then, as US President Donald Trump had repeatedly threatened, he would impose tariffs on the remaining Chinese goods with an estimated total of $300 billion. Actually, the current public hearings are being held about these possible levies.

If tariffs are introduced, they will cover all Chinese exports to the USA. However, some products, as noted by American businessmen, with all the desire to produce somewhere else is not possible, except in China.

The WSJ cites the head of Atlas PyroVision Entertainment, who notes that among the manufacturers of fireworks, for example, China has no equal in the world. In other countries of Asia, similar products are of much lower quality.

And in the US, no one has been producing pyrotechnics since the mid-1990s: it’s incredibly difficult and expensive to open such an enterprise in the United States due to increased safety requirements, workers ’qualifications, etc.

During the public hearings, New Balance Athletics Inc was also opposing tariffs. The company produces sports shoes in the United States and, in theory, should be among the beneficiaries of Trump's tariff policy. However, as noted in the company, components for the production of footwear, for example, soles which come from China. Therefore, the new tariffs, ultimately, will affect the price tag on American sneakers in stores.

Even American farmers complain – the basis of Trump's electorate. It turns out that Californian winemakers now can’t sell their wine because they were purchasing bottles for wine in China. According to the Xinhua News Agency, strict environmental regulations and the high cost of glass production in California led to the fact that over the past 20 years, the production of bottles has been moved to China. The increase in tariffs for glassware will lead to a significant increase in the cost of the production process, which, ultimately, will fall on the shoulders of consumers.

Previously, the Trump administration in response to business complaints recommended looking for suppliers in other countries or even better, moving production to the United States. But the fact is that the relocation of production is a very expensive process, and it will not be possible to implement it as quickly as introducing tariffs.

This means that for some time, the additional costs, in any case, will be borne either by producers or consumers. But even for those who simply buy some components in China, shifting to other suppliers may also be a problem.

For example, how it ended up with Strikeforce Bowling LLC, a supplier of goods for bowling. According to WSJ, citing the company's president, Strikeforce Bowling LLC was trying to find alternative manufacturers of bowling shoes in the Dominican Republic, Cambodia, and Bangladesh. However, no one wanted to meet order for such small batches.

As a result, Strikeforce Bowling LLC continues to do business with China, as the company simply failed to reach an agreement with anyone else.

Throughout the week of public hearings, representatives from more than 300 US companies are expected to appear in the US International Trade Commission, most of which will try to explain to officials from the Office of the US Trade Representative why a trade war is not the way out.

However, it is not yet known how useful these public hearings will be for the further process of settling the trade conflict, accroding to a professor at International Business School of Southwestern University of Finance and Economics in Chengdu, China.

“I think it’s hard to say how receptive Trump is to business demands. If the American president approached the problem from an economic point of view, the trade conflict between China and the United States would not reach the stage at which it is now. So I suppose Trump will ignore the opinions of businessmen until there is political pressure under which Trump will be forced to make some changes. Similarly, it is hardly possible to judge whether Trump is ready to make concessions to some companies, but it is clear that their arguments so far have had no significant effect on Trump. Trump has his phobias, his own electorate. There is an inner circle of businessmen who are important to Trump; he takes into account their interests. He has his own views since it is now important for Trump to strengthen support among his electorate. And his base is people with middle and low incomes who want to work in the USA. They do not think about future consequences, about the rising cost of living. It is more important for them to get jobs here and now. Moreover, Trump has his own phobias. Regardless of what the rest of the world is saying, the signals from the internal opposition, on the contrary, underpin Trump's belief that he is doing everything right. It is important for him to defend his own ideas, that is what this all is about”. Lu Jian said.

Prior to the public hearings, more than 600 US companies signed a letter to Donald Trump, in which they called on his administration to refuse to raise tariffs and reach an agreement with China.

Data on US imports over the past year show that the country has purchased $66.3 billion worth of goods in China that no other supplier or the country itself have any substitutes for. Moreover, leading US tech giants such as Intel and Qualcomm are opposing sanctions against Huawei, a Chinese telecommunications company.

The ban on the supply of Huawei components will not only reduce the companies’ revenue by $30 billion in the next two years, as Huawei CEO Ren Zhengfei recently admitted, but will also cut off American companies of a significant portion of revenue. After all, out of $70 billion spent by the Chinese company in 2018 for the purchase of components, $11 billion went to Qualcomm, Intel and Micron Technology Inc.

According to estimates by another American chip maker Broadcom Inc, the company will be short of $2 billion in revenue due to sanctions against Huawei.

According to Reuters, the United States Semiconductor Industry Association (SIA) has been consulting with US officials, trying to convince them that not all Huawei’s business could be a threat to US national security, and a total ban on the supply of any components to the Chinese company would be nothing but detrimental to US companies.

Views and opinions expressed in this article are those of Lu Jian and do not necessarily reflect those of Sputnik.

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