Original title: three possible ways to end the Sino US trade war
No one can take advantage of the trade war
Compared with the fierce and explosive atmosphere at the beginning of the month, the Sino US trade war began last week showing signs of easing.
China's statement at the Boao Forum has become an obvious turning point. After that, China has also announced a series of real open policies.
The U.S. side also found the "step" that China gave. Trump then said: 'I will not call it a trade war, because it is really a trade negotiation. '
Trump also said that if China is willing to further open its market to American products, the two countries will be able to avoid trade wars.
So, from the current situation, the two sides clamoured to levy tariffs on each other before, and raised the total amount very high, mainly to win more chips at the negotiation table.
01
At present, according to the Ministry of Commerce, "Chinese and American financial officials have not conducted any negotiations on economic and trade frictions.".
However, from last week's statement, China and the United States have now begun to create an 'atmosphere' for each other to prepare for negotiations.
Recently, many people are debating whether China will suffer more or the United States if the trade war really starts.
In fact, there is no point in arguing about these issues. If a trade war really starts, no one will be the last winner, and there will be a situation of "killing 10000 enemies and damaging 3000 ourselves".
Therefore, in my opinion, the statement made by China last week is the most correct way for a responsible big country to deal with trade disputes. First, take the initiative.
This statement shows that we have a clear understanding of this trade war, resist the pressure of domestic special interest groups and narrow nationalism, and make a pragmatic choice.
The following specific policies launched in China include:
1. The import tariff of automobiles will be reduced considerably, and the import tariff of some other products will be reduced at the same time.
2. Remove the restrictions on the proportion of foreign shares held by banks and financial asset management companies, and treat domestic and foreign capital equally; allow foreign banks to set up branches and subsidiaries in China at the same time;
3. The upper limit of foreign shareholding ratio of securities companies, fund management companies, futures companies and personal insurance companies will be relaxed to 51%, and there will be no restrictions after three years;
4. It is no longer required that at least one domestic shareholder of the joint venture securities company is a securities company;
5. In order to further improve the stock market interconnection mechanism between the mainland and Hong Kong, the daily amount of interconnection will be quadrupled from May 1;
6. Allow qualified foreign investors to operate insurance agency business and insurance assessment business in China.
7. Liberalize the business scope of foreign insurance brokerage companies, and be consistent with Chinese funded institutions.
The previous opening policies also included: encouraging the introduction of foreign investment in banking and financial fields such as trust, financial leasing, auto finance, currency brokerage, consumer finance, etc., "substantially expanding the business scope of foreign banks" and "Shanghai Luntong" to strive for opening within this year.
China has shown the sincerity of "being more open" to the world, and the US side has also made a positive response.
In April 10th, Trump passed Twitter: "thank you very much for president Xi Jinping's words of kindness in tariff and car import barriers"; … … and his position on intellectual property and technology transfer is also very inspiring. '
More importantly, the American business community does not want the Sino US trade war to really start.
Boeing said at the 2018 Asia Business Aviation Conference and Exhibition (abace), "as an enterprise, we are very supportive of the two governments' active and friendly negotiation and talks, which is the only thing we can do as an enterprise now. '
Therefore, the atmosphere of trade friction between the two sides has been eased a lot. The United States is also very clear that the U.S. economy will suffer a lot when the trade war begins.
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However, why was trump so tough on China before? It made China have to fight tit for tat.
Analysts believe that this is closely related to the change of domestic politics in the United States. Behind the trade war, the Republican Party has become a supporter of trade protectionism, and the change of the voter base is the fundamental reason for the change of the Republican Party.
According to the statistics of CNN in September last year, Trump's party support rate has been stable at about 85% for a long time, surpassing 82% of vice president burns and 66% of House Speaker Ryan.
According to the Pew Center's 2016 survey, under the influence of trump, the recognition of free trade among the Republican and Republican Party's middle voters fell sharply during the general election, from 56% in 2015 to 29% before the election.
After the election, as many as 85% of Republican voters firmly believed that free trade destroyed American jobs. Over the same period, that figure represented only 54% of Democratic voters.
According to a recent survey by Quinnipiac University, 58% of Republican voters support increasing tariffs, which brings legitimacy to trump's trade war.
Therefore, it is understandable that trump has been tough in the early trade war. He hopes to gain more benefits from China to win higher support.
According to the researchers' estimates, between 2000 and 2007, the United States lost 980000 manufacturing jobs due to China's import competition. It was these ordinary American blue collar workers who sent trump to the White House.
Therefore, for trump, the propaganda role of trade war is greater than that of imposing tariffs on China's $150 billion goods. His political foundation is not multinational enterprises, but blue collar workers.
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In fact, trump, as the presidential candidate in 2016, has always regarded foreign trade as one of the main Campaign guidelines, and threatened to impose 45% tariffs on all imports of China, as well as to define China as a 'currency manipulator'.
After being elected in 2017, trump took tax reform and medical reform as policy priorities, followed by foreign trade issues.
In April 2017, when China's senior executives visited the United States, an important consensus reached by China US trade was that a '100 day business dialogue' would be held. At that time, China and the United States entered the honeymoon period, and the United States finally failed to post China as a 'currency operator'.
In November 2017, during Trump's visit to China, Robert Middleton lethizer, the U.S. trade representative, showed a tough attitude on the issue of trade intellectual property rights, with nationalists taking the lead.
Later, trade frictions between China and the United States continued.
In January this year, trump passed the 201 act to impose tariffs on solar panels and washing machines, mainly for China. China counterattacked and announced an anti-dumping investigation on American sorghum imports.
In March, trump ordered tariffs on all U.S. steel and aluminum imports under act 232, citing national security. China threatened to impose retaliatory tariffs on U.S. pork, dried fruits and other imports.
From the end of March to the beginning of April, trump announced plans to impose a 25% tariff on US $50 billion of Chinese imports based on the 301 act investigation on China's intellectual property rights. China then countered, announcing that it was preparing to impose tariffs on US imports of equal value.
Trump later added fuel to the fire, threatening to impose tariffs on another $100 billion of Chinese imports. China counterattacks: 'new comprehensive measures must be taken'.
It can be seen from the above that there are not many trade sanctions actually implemented by both sides. The new tariffs already implemented by the United States are only 201 solar panels and washing machines and 232 steel and aluminum tariffs.
Therefore, the two sides are still at the stage of a war of words. Both China and the United States may understand that 'if we combine, we will benefit, if we fight, we will suffer.'
The following is the trend chart of Sino US trade in the past decade. Despite the constant trade frictions between the two sides, the volume of trade is growing in line.
It can also be seen from the figure above that the main purpose of the trade war launched by the United States against China is to hope that China can reduce its trade surplus. In 2007, China's trade surplus with the United States was 163.285 billion US dollars, which rose to 250.825 billion US dollars in 2016.
However, don't think that these huge trade surpluses are due to the fact that China has gained advantages. The figure below shows the export situation of foreign-invested enterprises in the past decade.
As can be seen from the figure above, the export of foreign-invested enterprises has accounted for about 50% of China's total export in the past decade, but it has declined since 2012, which is mainly related to the rise of local brands.
In addition, if we look at the total export volume of foreign-funded enterprises, it has been rising from 2007 to 2014, but in 2015 and 2016, it has declined.
Taking the iPhone & Chi; as an example, China (excluding Taiwan) has provided the coil module, RF antenna and appearance parts of the wireless charging receiver, the people's daily previously reported.
By the end of the day, China's manufacturing value is about $55, including $3 from the hard work of Chinese workers. In terms of the price of the iPhone & Chi; in the U.S. $999, China can only make about one twentieth of the money for each iPhone sold.
Therefore, in today's era of close Global trade, the economies of all countries have long been "you have me in you, I have you in me". A trade war will never only hurt each other and leave you unharmed.
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In the 1990s, China's economic strength was not strong enough. The U.S. used "301 clause" mainly to increase more chips in trade negotiations with China.
Later, after negotiations between the two sides, trade disputes often end with agreements signed by both sides. These agreements may be domain specific and have relatively limited economic impact.
Now that the two sides have reached a historical milestone, how will the Sino US trade war end?
Haitong Securities predicted in its latest report that there are three ways to end the Sino US trade war:
Possibility 1: negotiation and reconciliation between the two sides
China and the United States used the 15 day period of the proposed tax list and the 30 day period of publicity to negotiate their respective demands and reach a preliminary agreement. Trump's punitive tariffs on $60 billion of goods were not implemented.
If Trump's most important appeal is to reduce the deficit of the United States against China, there are two ways: first, to expand China's trade import to the United States, and second, to reduce China's trade export to the United States.
From the current situation, it is more likely that China will expand its import to the United States. We have said on different occasions: 'we do not aim to pursue a trade surplus, but hope to expand imports'
In terms of the negotiation results in history, China's easy to accept conditions may lie in liberalizing access to some service markets and increasing imports of American goods. Now, the liberalization of the financial industry is an example.
On the whole, if negotiation and reconciliation can be achieved, the impact of this trade friction on Sino US trade and economy will be relatively small.
Possibility 2: full or partial application of punitive tariff
Punitive tariffs will still be applied, but after negotiation, both sides have made concessions. In this case, the two sides may give way one step at a time, but punitive tariffs on technology products will still be partially implemented.
Under the tariff rate of 25%, if the United States levies taxes on China's imports of $60 billion, 50 billion, 30 billion and 10 billion, it will cause China's exports to the United States to drop by $13.2 billion, $11 billion, $6.6 billion and $2.2 billion, respectively.
In 2017, China's total export volume was US $2260 billion, and the impact of punitive tariffs on China's exports was 0.58%, 0.49%, 0.29% and 0.10%, respectively.
Similarly, when the tax rate drops to 15%, the impact on exports is 0.32%, 0.27%, 0.16% and 0.05%, respectively.
Possibility 3: the escalation of the conflict leads to the proliferation of tariff objects
With the escalation of trade conflicts, the United States not only levies taxes on the 60 billion US dollars of commodities mentioned at present, but also extends the tariffs to all the commodities exported by China. China will face the challenge of Japan