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June 19, 2019

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US ‘tariff stick’ is a hindrance to global growth

At a time when the world economy is still striving to sustain its growth momentum, the United States should stop building up tariff barriers and ditch its distorted trade policies for the good of itself and the world at large.

According to an estimation by the International Monetary Fund, US-China tariffs, including those implemented last year, could cut global GDP by 0.5 percent or about US$455 billion in 2020.

As IMF managing director Christine Lagarde noted upon the conclusion of the Group of 20 meeting of Finance Ministers and Central Bank Governors in Fukuoka, Japan, trade conflicts are the “principal threat” to the global economic outlook.

The Washington-initiated trade frictions will not only disturb the efficiency of global value chains, through which multinational companies maximize their profits in the current global factory model, but also weigh down global trade.

When the first round of new tariff measures affecting US-China trade took effect, G20 exports dropped by 0.8 percent and imports by 2.7 percent compared to the third quarter of 2018, the latest data issued by the Organization for Economic Cooperation and Development showed.

‘Ripped off’

When it comes to trade, the US administration insists that it is being “ripped off” and deliberately neglects service trade and its massive gain in value-added terms.

Washington kept touting tariff hikes as the sole means to reduce the so-called “trade imbalances” with its partners. Facts and figures, however, tell a different story. In the first five months of this year, China’s exports to the US edged down 3.2 percent year on year to 1.09 trillion yuan (US$157.4 billion), while imports from the US plunged 25.7 percent year on year to 335.3 billion yuan, pushing China’s surplus up 11.9 percent to 750.6 billion yuan.

If the United States imposes 25 percent additional tariffs on all imported goods from China, the US GDP will decline by 1.01 percent, with 2.16 million job losses and an additional annual burden of US$2,294 on a family of four, according to a February report by Trade Partnership, a US think-tank.

Tariff measures can’t solve the US trade deficit problem but only change the structure of its imports, Fu Xiaolan, founding director of the Technology and Management Centre for Development at Oxford University, told Xinhua in a recent interview.

If the US administration went down the dark road with its cold-war mindset and tit-for-tat trade measures, the downside risk of global economic outlook would definitely mount.

Ju Jiandong, director of the Centre for International Finance and Economics Research of Tsinghua University, has warned that the worst result would be a broken global value chain with more terrible influence on the world economy than that caused by the 2008 financial crisis.

Pessimists will prevail and the world economy will suffer if some US policymakers continue to be too arrogant and narrow-minded to self-reflect and adjust their perceptions.

As economies, both advanced and emerging, have never been so intertwined, no policymakers can afford to throw tantrums and act irresponsibly.


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