Washington:
The United States and China-two of the world's largest economies are locked up in a dangerous trade setup that may not have winners. While the US attempted Arm-Gone China-with increasing rates-to find a deal of his administration, it is becoming increasingly clear that Beijing has more leverage than President Donald Trump and his assistants think.
The United States remain an almost irreplaceable market for its manufactured goods. However, experts do not warn Washington not to underestimate Beijing's ability to withstand the compulsive tactics of the Trump administration. The combination of the centralized political control of Beijing, diversified export markets and stronghold on some strategic vital materials, including rare earth metals and magnets, gives China sufficient room to negotiate with the US.
The complexity of the dependence on the United States of China was clear during the weekend when the Trump administration smartphones, laptops and TVs exempted his new rates – goods that the US mainly imports from China.
Commercity
In FY24, Beijing had a trade surplus of nearly $ 300 billion with Washington, with around 15 percent of its total export on the way to the US. The popular consensus is that the country has more power in a trade conflict with large trade shortages, such as the US, than the surplus countries (such as India and China) whose exports that are imbalance.
But what if the country needs a shortage that the excess nation sells and the purchases stop it in the end hurts more? That is the case with China, on which the US depends on many things such as electronics, machines and some processed minerals, according to a Bloomberg report.
Some of the largest conglomerates in America, including Apple and Tesla, depend on the production in China. These companies were confronted with an existential crisis in the 145 percent Levies of Trump on goods from China.
The import of China from the US, on the other hand, is strongly focused on agriculture – such as soy, cotton, beef and poultry – and are therefore a low added value.
In conversation with Financial Times, Marta Bengoa, professor of international economy at the City University of New York, explained how the ultimate risk balance was on the American side in the US and the heavily dependent trade of China.
“The American dependence on China is higher, because China can find agricultural products elsewhere easier than the US can replace electronics and machines,” she said.
“For example, Beijing already buys soy from Brazil, so in the end China has a little more leverage.”
Inflation fears
Moreover, the US is a economy driven by the consumer and large taxes on things that consumers like can have consequences. Last week was a great demonstration of the power of the American consumers when Trump was forced to first blink while she was caused by most of his mutual taxes 90 days after a market blood bath caused by his taxes.
He has also exempt technical products such as smartphones, laptops and TVs from his new rates. Although Trump and his economic team later stood on that all exemptions would eventually be subject to other approaching rates, Americans were planning to buy a TV or smartphone a deferment in the short term.
New friends
Since Trump started a trade war with China during his first term by imposing sectoral rates on steel, aluminum and solar panels, Beijing has tried to reduce his dependence on American markets. The data from the US government show that China has reduced its trading exposure on the US market from 21 percent in 2016 to 13.4 percent last year.
At the same time, China has diverted its trade by Southeast Asian countries such as Vietnam and Cambodia, where Chinese manufacturers benefited from cheaper labor and reduced exposure to American rates, according to the FT report.
Chinese exports to Vietnam reportedly rose 17 percent in March.
While Trump tries to Strongarm China, President Xi Jinping started his first overseas journey of the year to show Chinese influence in the region. XI landed for the first time in Vietnam on Monday, where he asked the government to oppose “one -sided bullying” to maintain a global system of free trade – although he no longer called the US.
The Chinese leader is planned to then visit Malaysia and Cambodia. Beijing also tries to be due to excess capacity to alternative markets, including the EU, India and countries in Global South.
Autocratic leverage
In Autocratic China, the prevailing communist party is less reactive for pressure than the White House, which has already been forced to respond to unrest at the bond and stock markets.
According to Alfredo Montufar-Helu, head of the Chinese Center of the Think tank of the Conference Board in New York, Beijing entered the trade setup with a greater capacity to stimulate his economy in the case of a delay.
Beijing also has more levers to manipulate its domestic market, which is closely monitored by the authorities as an indication of social stability and economic sentiment. According to the FT report, Beijing has been seriously involved in the market in recent weeks, whereby the “national team” of state institutions encourages coordinated action to support stock prices.
Rare monopoly
China controls two -thirds of global rare nature production and more than 90 percent of the processing capacity, and the US depends on these minerals that are essential for modern production. This gives Beijing a critical lifting tree point.
China already stopped the export of some rare earth elements last week, including dysprosium and terbium, which are essential ingredients in products such as jet motors and EVs.
