Trade War More Harmful To US Economy

- Jul 31, 2019-

A year and a half after the United States first imposed punitive tariffs on Chinese goods, it has become clear that the US has not achieved its goal of containing China's peaceful rise.

On Feb 7 this year, the US announced a development strategy entitled "America will dominate the industry of the future", saying it will take measures to dominate four major future industries-artificial intelligence (AI), advanced manufacturing, quantum information science and 5G technology. Among the four sectors, China is ahead of the US in 5G technology and on an equal level in AI.

According to National Bureau of Statistics data, China's GDP grew 6.3 percent in the first half of this year-which, despite being the lowest growth rate in 27 years, is comparatively high given the global economic downturn, and thus reflects the resilience of China's economy.

Further, China has signed 17 free trade agreements (FTAs) with 25 of its trading partners, and 37 percent of its exports was destined for the economies with which it has an FTA. It is also the biggest trading partner of 128 economies, while the figure for the US is only 56.

Although the Sino-US import-export volume declined 14.2 percent in the first half of 2019, the China-European Union import-export volume increased 11.2 percent and Sino-ASEAN import-export grew 10.5 percent. As for China's total import-export volume in the first half, it was 14.67 trillion yuan ($2.13 trillion), up 3.9 percent year-on-year.

Moreover, the investments of the Hong Kong and Macao special administrative regions, the Republic of Korea, Singapore, Japan and Germany on the Chinese mainland increased 4.8 percent, 10.8 percent, 63.8 percent, 10.5 percent, 13.1 percent and 81.3 percent respectively. And the actual investment of the EU, ASEAN and countries along the Belt and Road (including investment through free port) increased 22.5 percent, 7.2 percent and 8.5 percent. This shows that while Sino-US economic relations have weakened, China's economic ties with other economies have strengthened.

On the other hand, the US economy is not showing optimistic signs. In May, the US' industrial output declined 1.5 percent year-on-year. In June, its composite purchasing managers' index was 51.5-the second lowest since 2016. This means the US Federal Reserve could announce interest cuts to stimulate the US economy in the short term, which in turn suggests the US' economic growth in this round has almost reached its peak.

According to US-China Business Council's recent data, in actual terms, China's exports to the US declined by more than $18 billion, accounting for 3 percent of China's total exports to the US. And US exports to China dropped by more than $23 billion, accounting for 15 percent of the US' total exports to China. So even though a trade war is a lose-lose game for both sides, the US stands to lose more than China were the trade war to intensify.

More important, China is not afraid of a trade war, because it can use it to deepen reform and opening-up. In fact, the trade war has prompted China to accelerate reform and opening-up in order to promote inclusive development in not only the country but also the rest of the world.