Sticks and carrots won’t work in trade war

The Donald Trump administration will begin to implement a 10 percent tariff previously slapped on $200 billion worth of Chinese goods soon, despite a recent invitation extended by US Secretary of Treasury Steven Mnuchin to China for bilateral trade talks later this month. So why is it the Trump administration, while imposing unabated pressure on China, is still offering an olive branch?

First, it is inextricably linked to Trump’s growing unpopularity. With fewer than 60 days to go, November’s midterm elections are expected to be the fiercest in the US in nearly two decades. Since Trump became the occupant of the White House, various US economic metrics have hit record highs, but the US public is still dissatisfied. Trump’s approval rating fell from 43 percent in July to 40 percent and even 39 percent currently, as showed in some polling. This is rare and dangerous for Trump —only former president Harry Truman had a similar approval rating prior to the 1946 midterms.

What disquiets the Trump administration most is dissatisfaction from voters in the Midwest and suburbs, which, as these sectors form his political base, has caused Trump’s support to drop. US farmers in the Midwest, where many pro-Trump voters live, have suffered heavily as Trump fights a trade war with many countries, including China. Given that several key House of Representatives races are due to be held in the suburbs, low approval ratings have forced Trump to consider targeted actions to reverse course.

The second reason for Trump’s declining approval rating is some of the US elite and public are averse to his further poisoning and polarizing the US political ecology. Trump’s actions and words over the past few months demonstrate a chaotic and unpredictable administration, increasing public doubt over his governance capabilities and putting him in a passive role.

Judging from the Trump administration’s recent push for a trade war, the results won’t be satisfactory. In its negotiations with Mexico and Canada on the North American Free Trade Agreement, the Trump administration has successfully forced Mexico into concessions but has failed to pressure Canada into making similar concessions no matter what pressures it exerts on Ottawa. When it comes to the trade war with China, the Trump administration has also adopted the practice of continuously increasing pressure in an attempt to bring China to its knees. However, the Chinese government has taken deliberate countermeasures, not only smashing the US’ attempt to force China to succumb, but also causing alienation among some US business people who had previously rested hopes on the Trump administration to benefit themselves.

With Trump’s approval rating going down, any escalation of a trade war will mean related US industries will be negatively affected and popular resentment will rise, which will cause Trump’s support rating to fall further. Once a trade war begins, there is no guarantee it will end before the November midterm elections, causing great uncertainty in Trump’s Republican Party.

In the wake of the US initiating a tariff war with China, talks have been off and on. In the next round of discussion, China should be prepared for arduous proceedings. Given that the US has regarded China as its “chief strategic competitor", it does not rule out the possibility the US will bring some demands to restrain China’s long-term development. The Trump administration is in a difficult situation at home, but the situation has not deteriorated to such an extent it has to beg for a deal with China.

It is more likely the Trump administration wants to use imposition of additional tariffs on $200 billion in Chinese products as a “big stick” to pressure China into negotiating a deal that would be good for the US. At the same time, strained relations with Trump also make it possible for US media outlets to hype up Sino-US economic and trade issues as a political hot button for US domestic politics, further complicating Sino-US trade. Against the background of the Sino-US tariff war, there has formed an anti-China force in the US with a clear intent to demonize China. Some are even spreading the rumor China is poised to delink from the world economy.

No matter how the situation changes, China should keep its composure and make a concerted effort to overcome temporary difficulties, stand against protectionism, safeguard multilateral free trade with the World Trade Organization as the core, and continue to deepen reform and expand opening-up.

The author is a researcher with the China Center for International Economic Exchanges.