Apr 02, 2018
It's time to give fitting reply to Trump
It's time to give fitting reply to Trump

US President Donald Trump signed a memorandum on Thursday, purportedly in accordance with Section 301 of the US Trade Act of 1974, to levy huge tariffs on imports from China and restrict Chinese foreign direct investment in the United States. What are the consequences of Trump's move? How should China respond to it? The experts of the Pangoal Institution shared their views.

The article was published on China Daily, 2018-3-27.  

Trump's move will hasten the pace of innovation

Zhao Guodong, a research fellow of the Pangoal Institution and the secretary general of the Zhongguancun Big Data Industry Alliance.

By restricting Chinese investment (and therefore mergers and acquisitions) in the US, Trump will make it even more difficult for Chinese companies to acquire technology and prohibit their US counterparts to tap into China's lucrative market. For instance, the win-win cooperation in the big data sector where the mergers and acquisitions of US small tech companies by Chinese enterprises offer technology to the latter and market access to the former will be put on hold.

However, the timely establishment of the State immigration administration will help China attract more tech talents and counterbalance the negative effects of Trump's move. Beijing has just introduced new measures to attract more overseas talents, including those from Silicon Valley. Besides, China's supply-side reform and the Belt and Road Initiative will help the country reduce its reliance on the US for trade and technology.

Actually, Trump's trump card in the trade war might prompt China to expedite the development of a more advanced and high-tech economy.

China can emerge from a Trump-instigated trade war as a winner if it hastens the pace of innovation in industries and technologies, and succeeds in attracting more talents from across the world with an open mind.

Global financial markets may not suffer severe setback

Xiong Peng, an academic comittee member and senior research fellow of the Pangoal Institution.

Trump's decision to impose tariffs of up to $60 billion on Chinese products and limit Chinese direct investment in the US raises several points.

First, the US' trade policy is based on geopolitics, rather than economics. The tariffs imposed on all steel and aluminum imports are only an attempt to ascertain China's reaction while the specific tariff policy's priority target is China.

Second, the team led by US Trade Representative Bob Lighthizer and US National Trade Council Director Peter Navarro has evaluated the possible damage the tariff policy could cause to the US. But it should also be presumed that both sides are adequately prepared for and intelligent enough to deal with a confrontation. This means both have a general assessment of their losses and believe that the benefits will outweigh the costs. Therefore, we need to decide which assessment is more realistic. In the case of a Sino-US trade war, the confrontation will constantly evolve, influenced by various factors, and could take every possible turn.

Third, the responses of the stock and financial markets, especially the Standard& Poor's index, yield some worrying signs. It is still to be confirmed whether the S&P's index fell as a result of Trump's tariff policy toward China.

However, as long as the nascent trade war does not affect the global risk preference and financial condition, the global financial markets might not encounter much turmoil.

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