While speaking at the Boao Forum for Asia, Chinese President Xi Jinping appeared to make promises for reform in key areas, cited by U.S. President Donald Trump and officials within his administration as justifications for a trade war. In his speech, Xi pledged to ease foreign ownership limits in the financial and automotive industries, lower tariffs on imported vehicles, and improve the protection of intellectual property rights.
Xi pledged to lower tariffs on imported cars, ease foreign restrictions in the finance and automotive industries enhance IP protection
It’s unclear to what extent these unspecified pledges are a means to de-escalate a trade war, and to what extent they are part of larger economic reform efforts from Xi and Premier Li Keqiang. Both leaders have been hinting at efforts to open up China’s economy more for the past few years, but so far there have been few signs of any implementation.
Regardless, President Trump responded favorably on Twitter.
Very thankful for President Xi of China’s kind words on tariffs and automobile barriers…also, his enlightenment on intellectual property and technology transfers. We will make great progress together!
— Donald J. Trump (@realDonaldTrump) April 10, 2018
The biggest issue at hand is the lack of consistency within the Trump administration on these trade issues. Trump’s willingness to quickly pivot on major political issues is well-known, and his favorable response here is by no means a sign that a trade war will be successfully averted.
While Trump has taken a conciliatory tone, other Republicans have continued to use harsh rhetoric
Moreover, senators within the Republican Party have continued to take a harsh stance on Sino-American trade relations, even with Xi’s latest comments. Trump has at times instantaneously altered his previous stance due to recent advice from members of his party, or even advice from outside it.
Perhaps the strongest indictment of Chinese trade practices came from Senator Chuck Grassley of Iowa. Grassley commented on a recent trip he made to China as part of a trade delegation, saying: “I came away with the opinion that they’ll do anything legal or illegal, anything moral or immoral, anything ethical or unethical to get ahead and to stay ahead.”
On the Chinese end, comments are similarly muddled, although for different reasons. A spokesman from China’s Ministry of Commerce, Gao Feng, stated in response to Xi’s comments: “I hope some people in the U.S do not misjudge the situation…If the United States takes any action to escalate the situation, China will not hesitate to fight back.”
Chinese state bodies have indicated clearly that China will respond in kind to any trade war escalations
The “joint” message from various bodies and figures within the central government is clear: “China is willing to make changes, but these are not concessions.”
Given the importance of both the American and Chinese economies for virtually every other economy and most major industries, including international tourism, these developments seem to only add more uncertainty as to where Sino-American trade relations are heading.
It’s for this reason that countries around the world are already preparing themselves for the potential fallout. For example, the Thai Commerce Ministry recently revealed the results of a preliminary study of the potential effects of a trade war on Thai industry. There’s even been speculation that some nations stand to benefit substantially from a trade war, particularly Australia.