US Should Brace for ‘Blowback’ After Shooting Itself in the Foot With Tough Anti-China Tariffs

China has vowed to retaliate to the Biden administration’s tough new levies on a broad array of Chinese-made goods, ranging from semiconductors and solar power cells to electric cars. Veteran financial analyst Paul Goncharoff explains why the US has effectively just shot itself in the foot.

China’s Commerce Ministry warned Tuesday that it would “take resolute measures to safeguard its own rights and interests” in response to the US’s tariff hikes, accusing Washington of turning economic and trade issues into an instrument of “domestic political considerations.”

The tariff increase “violates President Biden’s commitment ‘not to seek to suppress or contain China’s development'" and “is not in line with the spirit of the consensus reached” between Presidents Biden and Xi, the Ministry said in a statement.

“This will seriously affect the atmosphere of bilateral cooperation. The United States should immediately correct its wrongdoing and cancel the additional tariffs imposed on China,” the ministry urged, adding that “the WTO has already ruled” that the restrictions are illegal.

The warning came just hours after the White House announced 25-100% tariff hikes on an array of Chinese goods, from rare earths minerals, steel and aluminum to semi-finished and manufactured goods like lithium batteries, semiconductors, photovoltaic cells, ship-to-shore cranes, electric vehicles and medical products.

The White House accused Beijing of “non-market policies and practices” resulting in “growing overcapacity and export surges that threaten to significantly harm American workers, businesses and communities,” and claimed that the Asian industrial powerhouse has engaged in “forced technology transfers and intellectual property theft [contributing] to its control of 70, 80, and even 90 percent of global production for the critical inputs necessary for our technologies, infrastructure, energy and health care.”

The tariff hike followed a review of restrictions imposed on China by the Trump administration after it launched a trade war with Beijing in 2018, with Team Biden declining to roll back any of the restrictions put in place by its predecessors.

China responded to the Trump-era measures with tit-for-tat restrictions on American exports, ranging from food goods to major American brand name goods like Harley Davidson motorcycles and Jack Daniels whiskey.

US Should Brace for Blowback

The Biden tariff hike constitutes “a jumble of US domestic politics played out on the world stage” ahead of the November elections, and Washington should expect “blowback” that “hits harder than the [tariff] shots fired,” says market analyst and independent economic consultant Paul Goncharoff.

“Simply stated it is overt protectionism, in breach of not just the rules of the WTO, but unilaterally dismissing the ‘rules-based order’ of the entire world trading system” that the US played a central role in creating, the observer told Sputnik.

Goncharoff expects China to stick to its traditional tit-for-tat approach to retaliating to US economic aggression, and says the Asian nation has demonstrated its ability to “play the long game” as far as reprisals go. Beyond formal retaliation measures in the form of trade restrictions, Beijing has access to an array of tools to make Washington regret its decision, the analyst warned.

“The bottom line is that they can and shall increase their focus on the emerging and developing world which numerically is the vast majority of global markets. One just has to carefully look at what and who is included in the Belt and Road Initiative, BRICS, the Shanghai Cooperation Organization, the African continent, MENA, Mercosur, and the competitive advantages China has proven for more than three decades. I do not think that the global West can seriously compete and win the non-G7 trading world.”

Paul Goncharoff

Market analyst and owner of Goncharoff LLC consulting firm

This includes opportunities in developing world countries which have been developing themselves out of poverty and have started to become consumers of the kinds of products China produces, Goncharoff explained, emphasizing that these markets will continue to grow and expand.

The independent observer also took issue with the White House’s characterization of China’s successes in the production of the tariffed goods as being the result of “non-market policies and practices.”

“Remember that China is the world’s low-cost producer of many of these goods that will be tariffed further by the US. Quite simply it is because China’s been investing in these industries fro 20+ years, while the United States has been debating issues like solar power, EV transport, batteries, etc. It is no surprise that they can outcompete both the US and Europe – they have planned, invested, and worked very hard for their competitive edge,” Goncharoff said.

Ultimately, “There are no clear positive outcomes” to the US decision over the short run, Goncharoff believes. China will face a temporary loss of markets, while ordinary Americans and by extension Europeans, will suffer inflation and price hikes. “It is a unilateral spreading of unnecessary economic misery.”

On top of that, the analyst predicts that the US protectionist moves won’t result in an actual increase in America’s manufacturing prowess, or improve investment in primary industries, “as these areas take years to develop,” and must be focused on consistently, and not just remembered once every four years come election season.

“China will have little to no actual competition from the US and Europe” in the targeted areas, and “as the fortune cookie predicts...will be able to win over world markets in the emerging and developing economies, all of which are in increasingly sophisticated consuming growth phases,” Goncharoff summed up.