Sputnik: On Monday, Chinese officials allowed the country’s currency to drop below the psychologically important point of seven to the dollar. Many experts have argued that weakening China’s currency undercuts American producers. What countermeasures could the US adopt in order to keep the pressure on the Chinese economy?
Professor Don M. Chance: Great question. Trump knows they need us more than we need them, but we do still need them. The US has enacted some subsidies to help ease the pain, but it should also be pursuing other outlets for selling our products, such as grain, which we export a lot to China. China is, however, only the 10th largest customer of US grains. That means there are nine other countries who buy our grain and who generally play fair. We have tariffs with these countries, and they have them with us. We should cut them some deals and open up more of the market to them to make up for the China loss. Likewise, for other goods that China buys from us.
Sputnik: On Monday US financial markets suffered from a new round of tariffs which were implemented by Trump administration. Do you think this financial instability could result in a new financial crisis?
Professor Don M. Chance: The market has been overvalued for a while and needed some kind of shock to bring it back to reality. That said, so far today it is back up so there are clearly no long term effects, at least not right now.
Sputnik: How do you see the next phase of trade negotiations between China and the US? Do you think both sides are willing to find a compromise? What is going to happen with the August deadline?
Professor Don M. Chance: Trump has long had a reputation of being a tough negotiator. China didn’t believe it until now. I believe China will ultimately bend. If this were an election year, Trump might bend but he has some time to let the negative effects go away before he runs again.
Sputnik: What other retaliation measures do you think both actors willing to use in case of escalation?
Professor Don M. Chance: The US has thousands of tariffs with other countries (there is a nice spreadsheet databased online that lists all tariffs item by item). I suspect there are a lot more products on which he can place tariffs. Countries could stop all this craziness if they would allow free trade. Trump made that suggestion to the G-7 and they thought he was crazy. They all want tariffs. Once you have a tariff, you’re in a trade war. The US has been in that war with every country but especially China for a long time. Trump is the first one to fight back.
The views expressed in this article are those of the speaker and do not necessarily reflect those of Sputnik.
