Resurgent Trade War Looms: How a Return to Tariffs Could Reshape Global Relations
A looming trade war between the U.S. and China threatens to send ripples through the global economy, shaking up supply chains and raising prices for American consumers. The way China responds to potential new tariffs could reshape global trade relationships for years to come.
China had just begun to emerge from a period of fragile economic recovery when news broke about a potential reemergence of trade tensions. The world’s second-largest economy is still grappling with a battered housing market and sluggish consumer demand.
This renewed uncertainty comes as a stark reminder that the trade relationship between the two economic giants is far from stable. There are a mix of sentiments in Beijing on how to react to the possibility of sweeping tariffs.
“From the Chinese side, the biggest fear is uncertainty,” explains Rana Mitter, S.T. Lee Professor of U.S.-Asia Relations at Harvard Kennedy School.
While China heavily relies on exports, particularly to the U.S., the U.S. market for Chinese goods could shrink significantly if these additional tariffs taking effect.
One possibility under consideration in Beijing is that tariffs could be weaponized as leverage for obtaining better trade deals with the U.S., a move reminiscent of the "Phase One" trade deal negotiated with the Trump administration.
For years, Beijing has been strategizing on how best to navigate evolving trade tensions. The prospect of escalating tariffs introduces complex uncertainties. The primary message seems to be the need for caution.
While China is heavily reliant on exports, particularly to the U.S., Beijing knows the complex ripple effect new tariffs could create bordering on the chaos that a trade war creates with ripple effects throughout the world.
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There are differing assessments about how effectively breeds U.S. market in reaction to tariffs. Some experts believe Chinese leaders might see this as an opportunity to strengthen ties with traditional U.S. allies in Europe, the U.S.
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Who Pays the Price?
If tariffs are imposed, American consumers effectively become collateral damage. Prices across the board would spike, hurting low-and middle-income families the most. But beyond the price increases, the damage could extend much deeper into the American economy.
One potential consequence is a disruption of supply chains. many experts are calling for a diversification away from China, but it’s true that many businesses are deeply entrenched. Finding alternative suppliers wouldn’t happen overnight, and there’s a shortage of immediate substitutions for the vast amounts of goods manufactured in China.
Adding further potential confusion is that besides dealing with a potential trade war, we are also discussing tariffs on the biggestHeal,
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How might China utilize tariffs as a strategic tool in this escalating trade tension with the U.S.?
## Resurgent Trade War Looms: A Conversation with Professor Rana Mitter
**Host:** Welcome back to the show. Today, we delve into the looming possibility of a renewed trade war between the U.S. and China. Joining us is Professor Rana Mitter, the S.T. Lee Professor of U.S.-Asia Relations at Harvard Kennedy School, to shed light on this complex issue. Professor Mitter, thanks for being here.
**Prof. Mitter:** It’s a pleasure to be here.
**Host:** Professor, as you know, this renewed trade tension comes at a vulnerable time for China, with its economy still recovering from recent turmoil. How might China react to these potential new tariffs?
**Prof. Mitter:** From the Chinese perspective, the biggest fear is uncertainty. [1] They are trying to navigate a delicate economic recovery and a volatile global climate. A return to tariffs would obviously disrupt their export-heavy economy, particularly their reliance on the U.S. market.
**Host:** We’ve seen China use tariffs as leverage in the past, such as in the “Phase One” deal during the Trump administration. Could we see a repeat of that strategy?
**Prof. Mitter:** That is certainly a possibility. Beijing may see this as an opportunity to use tariffs as a bargaining chip to secure more favorable trade terms with the U.S.
**Host:** But are there risks associated with such a strategy, given the interconnectedness of the global economy?
**Prof. Mitter**: Absolutely. A trade war would have ripple effects throughout the world, disrupting supply chains and potentially increasing prices for consumers in both countries. [1] China is aware of these complex repercussions and the potential for economic chaos. The primary message coming from Beijing seems to be one of caution and a need to carefully assess the situation before taking any drastic measures.
**Host:** Professor Mitter, thank you for sharing your insights on this crucial issue. The future of global trade hangs in the balance, and understanding Beijing’s perspective is crucial in navigating these turbulent waters.
