MNI INTERVIEW: China Should Offer To Boost US Industry-Advisor
MNI (BEIJING) - China should offer to collaborate in boosting American industry as it seeks to stave off U.S. President-elect Donald Trump’s threats of 60% tariffs, but Beijing also needs to prepare for a worst-case scenario of a significant further deterioration in bilateral relations, a prominent economist told MNI in an interview.
"To achieve large-scale reindustrialization, the U.S needs to attract foreign investment and technology, and China is ahead of the U.S in terms of many medium-tech sectors, including automobiles, and has plenty of capital ” said Peking University Professor Yao Yang, who has participated in meetings with top officials including President Xi Jinping and former Premier Li Keqiang, “Leveraging Chinese capital and technology could be a shortcut for Trump’s manufacturing renaissance,” he said.
China could also be the largest buyer of expanded U.S. energy production under Trump, Yao said, noting that some American companies have already started to purchase Chinese-made LNG port facilities.（See:MNI INTERVIEW: China Faces US Tariffs, Capital Restrictions）
A 60% tariff on Chinese imports to the U.S. could cost 1 to 2 percentage points of China’s GDP, warned Yao, whose writings have won recognition from senior leadership. （See:MNI INTERVIEW: US Seen Holding China Tariffs High- Ex-Official
SIGNIFICANT DANGER OF RUPTURE
He stressed a tit-for-tat tariff war would not be effective in reducing the U.S. trade deficit, and that for its part China has, in practice, exempted most of the additional tariffs it imposed on U.S. goods from 2017-21. In addition it has been restrained in its retaliation against European Union tariffs on Chinese electric cars, seeking instead to strike a deal around voluntary limits on exports.
But the danger of a rupture in relations with the U.S. will be significant, said Yao, pointing to Trump’s hawkish National Security Council including new deputy national security adviser Alex Wong.
“I am really concerned about black swan events,” the top economist said.
China may face annual negotiations with the U.S on its most-favoured nation trading status on yearly basis, as occurred before it joined the World Trade Organization, he said.
The U.S. is also likely to close loopholes, such as by lowering the USD800 tax-exemption threshold for small parcels sent to the U.S. and also by cracking down on Chinese companies who set up manufacturing operations in third countries, Yao said.