China doesn’t bring as many weapons to the trade war as many people think. From Daniel Lacalle at dlacalle.com:
In these weeks we have read a lot about the so-called trade war. However, this is better described as a negotiation between the largest consumer and the largest supplier with important political and even moral ramifications. This is also a dispute between two economic models.
Nobody wins in a trade war, and tariffs are always a bad idea, but let’s not forget that they are just a weapon.
Why right now?
For many years China has been allowed to maintain a mercantilist dictatorship and protectionist model under the excuse that its high growth made it attractive.
Shortly before the US launched its set of tariffs, the Chinese government accelerated two dangerous policies that we cannot ignore: intensifying capital controls , limiting the outflow of dollars from the country, and increasing the list of banned companies and sites, two measures that proved that the Chinese government was unlikely to open its economy, rather the opposite. These measures intensified in the last year and a half. Two other factors show China’s decision to halt the opening of its system. The “Made In China 2025 Plan” and the removal of the two-term limit on the presidency, effectively allowing Xi Jinping to remain in power for life.
Between 2004 and 2018, the United States filed 41 complaints against China at the World Trade Organization, focused on 27 different areas. The vast majority of these WTO resolutions are not enforced (“Paper Compliance: How China Implements WTO Decisions.” The previous strategy of looking the other way and expecting the Chinese economy to open up little by little met the reality of increased interventionism.