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Showing posts with label Tariffs. Show all posts
Showing posts with label Tariffs. Show all posts

Sunday, May 4, 2025

Trump’s tariff fight with Xi reveals China’s great divide

 

Going strong: China has become less reliant on American consumers since Trump’s first trade war in 2018. — Reuters

HOW does an escalating US-China trade war affect people’s well-being? In China, it depends on who you ask.

Some are energised by the fight. Electric-vehicle makers are in hyperdrive, pushing out luxury new models, self-driving features and battery-charging technologies that allow drivers to recharge almost as fast as filling a petrol tank. Instead of selling cars to Americans, the likes of BYD are taking on Tesla in growth regions such as South-east Asia.

There’s also talk of an “engineer dividend” – credit to President Xi Jinping for his focus on higher education in sciences. The success of DeepSeek’s reasoning model, released in late January, gave rise to a realisation that China is not just a manufacturing powerhouse whose status is being challenged by President Donald Trump’s tariffs. Rather, Beijing may have found a fresh growth model. It can grab market share in software services, which the US excels at. Almost every week, Chinese tech firms have been releasing new artificial intelligence models and applications.

In part because of a stock market rebound, luxury home sales in Shanghai are booming. Property markets in tech hubs such as Hangzhou and Shenzhen are also seeing a revival, a welcoming reprieve after a four-year downturn.

After all, China has become less reliant on American consumers since Trump’s first trade war in 2018. Exports to the US accounted for just 15% of the total in 2024, versus 20% a decade earlier. The economy will shrink by only about 3%, even if the entire trading route to the US gets wiped out.

Beneath that stoic defiance, however, are genuine concerns about how to make a living, especially among blue-collar workers. A decline in exports, until now a rare bright spot in an otherwise anaemic economy, will only create more competition for low-skilled jobs. Already, demand for their labour is diminishing due to factory automation and the end of a decade-long property boom. In 2024, the manufacturing and construction sectors absorbed just over 40% of migrant workers, versus more than half a decade earlier.

Apparel is the third-largest category of US imports from China, after communication devices and electronic equipment. On average, the textile industry hires more than 25 people for every one million yuan (RM589, 846) in gross domestic product generated. About 16 million jobs could be lost thanks to Trump’s tariffs, according to Goldman Sachs Group estimates.

What these displaced might do next matters to the rest of the 425 million-strong blue-collar workforce. In recent years, people have been moving in droves into the gig economy, working as housekeepers, drivers, delivery workers and social media influencers.

Already, some of these sectors are getting crowded. In 2024, the number of ride-hailing drivers jumped by 27% to 38 million, prompting some local governments to warn about overcapacity. No surprise, their average monthly pay fell.

Or consider the 18 million social media live streamers, often young people who want glamour in their work. Most of them aren’t getting rich – they are barely getting by. A recent academic survey shows that 93% make less than 3,000 yuan a month, not even half of what an average delivery person earns.

It’s unlikely Beijing will launch the kind of bazooka stimulus witnessed in the aftermath of the global financial crisis (GFC), the last time China’s exports registered double-digit declines. Back then, more than a third of migrant workers, or over 80 million, were employed in manufacturing. The magnitude of job losses was much larger.

Barring mass street protests, the government’s attitude towards blue-collar labourers has been that since many have few skills, they can be flexible. Manufacturing jobs gone? No problem, they can go into the services sector, or back home to the farm. During the GFC, at least 20 million laid-off migrant workers returned to rural areas. This attitude is unlikely to change just because of Trump.

In fact, this trade war only exacerbates a separation of the elite from the grassroots. For the skilled and well-to-do, US tariffs barely touch their lives, and they are thinking of new money-making opportunities now that Trump is tearing up the existing world order (Gold, anyone?). But millions of others are only getting more anxious. – Bloomberg Opinion/TNS

by Shuli Ren, a Bloomberg Opinion columnist covering Asian markets.

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Friday, April 26, 2024

Overcapacity’ an excuse to target ‘Made-in-China’

 

The overarching US strategy of exaggerating the issue of China’s overcapacity … is aimed at checking China’s industrial development by resorting to a beggar-thy-neighbour policy. — China Daily

RECENTLY, some US and EU officials have said China’s overcapacity distorts global pricing and production patterns. Concur-rently, the Joe Biden administration is considering imposing high tariffs on Chinese steel and aluminum, potentially opening a new front in the ongoing trade conflicts in order to contain Beijing’s “Made in China” drive.

Overcapacity is an economic term that signifies a situation in which there is too much production capacity relative to current demand levels, and hence it should not be overly “pan-securitised”.

Capacity utilisation rates are crucial indicators of whether capacity is adequately leveraged, with a very high rate generally indicating a shortage and a low rate suggesting excess capacity or an irrational capacity structure.

According to the latest data from Trading Economics, the United States has a capacity utilisation rate of 78.3% while China’s stands at 75.9%.

Developed countries including the United States and European nations consider any rate between 79% and 83% an indicator of supply and demand. China’s rate is not significantly lower than the healthy range.

Moreover, China has eliminated outdated steel production capacity to a large extent, having reduced about 300 million tonnes of steel and one billion tonnes of coal capacities, including entirely eliminating 140 million tonnes of substandard steel capacity, over the past decade.

Western pressure on China’s industries and trade has intensified in recent years, with many Western countries restricting the export of semiconductors to China and curbing the import of Chinese-made new energy vehicles, while taking “reshoring” or “near-shoring” measures, further exacerbating global overcapacity and straining the global economic governance system.

This is not the first time the West is using “overcapacity” as a pretext to suppress China’s manufacturing sector. In 2012, the European Commission initiated an anti-dumping investigation into Chinese photovoltaic products, initially planning to impose a 47.6% tariff on them. But in July 2013, China and the European Union “amicably” settled the photovoltaic trade dispute.

Unlike previous occasions, however, this round of scrutiny by the West is focused on China’s advanced manufacturing, particularly in clean energy sectors such as electric vehicles (EVs), photovoltaic panels and lithium batteries – areas in which there is intense Sino-US competition and China enjoys competitive advantages.

In recent years, spurred by the “New Washington Consensus”, the Joe Biden administration has increasingly used administrative and other non-market forces to ensure it has the upper hand in its competition with China in strategic future industries.

Government intervention

Also, the United States has been strengthening the industrial policy through government intervention, which, in essence, is strategic protectionism.

As many as 49 industries including automobile, aerospace, defence, electrical equipment, information and communications technology, and renewable energy in the United States get huge government subsidies.

Also, while strengthening itself, the United States has also increased efforts to weaken others. In recent years, under the guise of combating climate change and promoting low-carbon development, the United States has enacted the Inflation Reduction Act, which imposes discriminatory subsidy policies on products from World Trade Organisation (WTO) member states, specifically EVs from China.

These measures distort fair competition and will disrupt the global supply chains, as well as violate WTO rules of national treatment and most-favoured-nation status.

With the US presidential election still seven months away, the “overcapacity” issue is likely to be exploited by US politicians on the campaign trail, and the United States could intensify its rhetoric on China’s overcapacity, possibly imposing tariffs on Chinese exports including EVs, power batteries and photovoltaic panels.

It could also ramp up anti-subsidy and anti-dumping investigations, and impose green or labour standards barriers to limit Chinese exports. Alternatively, it may continue to forge alliances based on different issues to contain China.

The overarching US strategy of exaggerating the issue of China’s overcapacity is not aimed at striking a balance between global supply and demand; instead, it is aimed at checking China’s industrial development by resorting to a beggar-thy-neighbour policy.

The narrative of overcapacity is crafted by the United States to curb China’s industrial upgrading, safeguard certain Western countries’ vested interests in the global industry and supply chains, promote the reshoring of supply chains to the United States, bolster the US’ manufacturing competitiveness, contain China’s technological progress and prevent it from achieving breakthroughs in advanced manufacturing and strategic industries. — China Daily/ANN

Zhang Monan is deputy director of the Institute of American and European Studies at the China Centre for International Economic Exchanges. The views expressed are the writer’s own.

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