US trade war against China: Shooting at the wrong target

March 5, 2018

HONG KONG – The French financial group Natixis is arguing that, while an imposed tariff of 10-25% may look relevant on the surface, the targetted approach on steel and aluminium may not be the right way to go, even for the US. “To start with, (the tariffs) do not even hit the key products behind the US trade deficit with China,” Natixis says.

“Although we still do not know which exact products will be included in the final decision of the imposed tariffs, we can already estimate their approximate relevance, which is clearly low.

“Assuming that all aluminium and steel related products are included, they would only constitute 2.88% (for steel) and 0.54% (for aluminium) of the US deficit against China.”

Natixis says: “One may say that the US may escalate the trade war further to include more important products. But this is also easier said than done.

“In fact, the key products that help China to hold such a massive such trade surplus with the US are electronic products (i.e. telephones, data processing machines and communication apparatus) and traditional labour-intensive products such as toys, furniture, footwear and plastics.

“Both types of products are hard for the US to target in a trade war for two reasons.

“The former is an integral part of the US production chain so that increasing import tariffs would only increase the cost of production and reduce the competitiveness of the US.

“The latter type of products cannot be produced as cheaply in the US so tariffs will only hurt American consumers.

“It seems the US Administration keeps on shooting at the wrong target.” (ATI).