The US Government announced a massive round of import tariffs (import duties) in September, targeted at US$ 200 billion of Chinese imports, including a wide range of mass consumption goods. It is the latest and biggest move in what is being revealed to be geo-political warfare, using trade policy as one among numerous weapons. China has retaliated to these latest US tariff hikes, by announcing new trade tariffs to take effect from 24th September 2018 on $60bn of American goods and services sold in China
The first step was taken in March this year, when the US Government imposed tariffs of 25% on steel and 10% on aluminium imports from European Union, China, India and other countries. Exemptions were granted for imports from Canada and Mexico. Imports of steel and aluminium from these neighbouring countries consist largely of sales by American companies with production sites located there.
The immediate beneficiaries of the US import duties on steel and aluminium have been the giant American multinational companies in these sectors, which are charging much higher prices for their products. On the other hand, numerous American companies which import raw materials and components from other countries into the US are facing higher costs and lower profits. Many of them voiced objections to the March import tariffs.
In June, the US Government launched a second round of import tariffs on many more commodities. They affected about US$ 50 billion (Rs. 3500 crore) of Chinese exports of industrial inputs and high-tech products to the US. The Chinese Government retaliated with tariffs on US exports to China worth US$ 50 billion.
In September, the US announced that it had renegotiated a new trade with Mexico and Canada to replace NAFTA.Earlier in July, the US and EU agreed to negotiate new trade terms in the face of US threat to impose tariff on European automobiles. The EU agreed to import US farm products and oil and gas to stave off this threat.
National security was the official justification given by the US Government for the tariff hikes announced in March. By June, the official justification developed into a tirade against China and its alleged theft of technology and unfair trade practices. President Trump has declared that the WTO has failed to check China’s unfair trade practices and hence the US is justified in taking unilateral action in the form of a tariff offensive.
President Trump also claims that these actions are aimed reducing the US trade deficit and at bringing back jobs to America. These are all false claims, meant to deceive the American working class and people. The real aim of the tariff war against China is to prevent it from gaining technological supremacy and challenging the dominant position of the United States in world affairs.
The rulers of China have proclaimed their aim of advancing from being the dominant producers of steel, plastics, toys and numerous consumer goods as well as electrical equipment, into being dominant in products that involve the highest level of technology. The US import tariffs announced in June were focused on high-tech products from China in aerospace, marine, telecom, robotics, medical devices and electric vehicles. It was accompanied by official US propaganda that China is stealing American technology and American jobs.
The US imperialists want to sabotage China’s state-sponsored plan to achieve technological supremacy, which is being pursued under the banner of “Made in China 2025”.
The US imperialists are blaming China for the huge and growing US trade deficit. In reality, the ever growing massive trade deficit of the United States is an inevitable result of the agenda of trade liberalisation, which the US itself has been championing for the past 25 years or so.
Since the middle of the 1990s, the leading imperialist powers of the world led by the US have been forcing all member states of the World Trade Organisation (WTO) to lower import duties. Lowering national barriers to the free flow of commodities and capital was promoted as being “free trade”, allegedly for the benefit of all.
The rules laid down by the WTO and imposed on all its members have been neither free nor fair as far as the majority of peoples of the world are concerned. The rules imposed by the WTO benefited the biggest capitalist corporations of the world to expand their market shares by penetrating deeper into all countries and markets of the world. It restricted the rights of poorer and weaker nations to protect their markets. At the other pole, the most powerful imperialist states of North America, Europe and Japan not only dominated the WTO but also formed regional trading blocs through various multilateral agreements.
The growth of world trade over the past two decades has not delivered benefits for all. On the contrary, it has led to the intensification of exploitation of the working class in all countries. It has led to widespread destruction of livelihood and jobs in the majority of nations of the world. It has widened economic disparity and inequality both within and between countries. It has dragged the world economy repeatedly into one crisis after another.
For more than two decades now, capital and production have been shifting to wherever labour and raw materials are cheaper or environmental safeguards are easier to violate. One of the results of this outward flow of capital has been the loss of manufacturing jobs within the United States and other advanced capitalist countries. Another result is the rise of China as a global power and more rapid capitalist growth in India. Yet another result is the huge trade deficit of the US, whose imports far exceed its exports and the gap keeps widening year after year.
In the name of addressing the problem of the widening trade deficit, the US imperialists are using import tariffs as a weapon to bully their major trading partners. In particular, they are using it as a weapon to weaken China, whose growing influence is viewed as the greatest threat to the continuation of US hegemony over world affairs.