It goes against the grain to repeat something already told more than once, especially when it has been told so clearly by so many. But it seems that needs must, for the U.S. continues to turn a deaf ear to warnings that its unilateral actions risk damaging global trade and undermining the global trade system.
Jittery investors in the U.S. have signaled the growing anxiety around the world that the two largest economies are exchanging range-finding fire ahead of a full-on trade war after China had to state once again that its behavior is not malleable to the unreasonable whims of the Trump administration.
That China has not capitulated to the U.S.' intimidation seems to have put the U.S. President Donald Trump's nose out of joint. For after China responded to the U.S. Trade Representative announcing a proposed list of Chinese imports valued at an estimated billion as targets for additional tariffs with a similar-value list of U.S. imports that it had targeted in turn, Trump directed the USTR to identify Chinese goods for an additional 0 billion worth of tariffs.
Yet Trump well knows that China is not bound to please him or his administration with its responses; especially when its responses are to uncalled-for provocations. Should the U.S. administration follow through on its latest threat, it can expect China to announce "immediate and vigorous countermeasures" in retaliation.
And China still has many cards to play. It could, for instance, consider targeting the cross-border service trade in which the U.S. enjoys a huge surplus with China. And U.S. multinationals in China, which have pocketed tremendous profits in the world's largest consumer market and account for a major part of China's nominal trade surplus with the U.S., could also be a target if the Trump administration announces further tariffs targeting Chinese goods.
That would be a scenario that would prompt more in the U.S. to join in the chorus of criticism already directed at Washington.
For the stock market reaction is not only about the tit-for-tat tariff announcements; it also reflects the pessimistic prospects for trade if the Trump administration refuses to stop making its protectionist moves to pander to its misguided designs.
China is being forced to react to protect its legitimate interests but in doing so it is also championing rules-based trade, as the Trump administration has resorted to domestic laws to target Chinese goods with tariffs, a move that runs roughshod over the international trade rules of the WTO.
The Trump administration should exercise some restraint instead of trying to do injury to others out of unfounded fears or the need to play to its domestic gallery of supporters.