Losses in the hundreds of billions of dollars already in the coming months can expect China - and all because of the document that has just been adopted in the United States. Now everything depends on the decision of the next administration of the White House and Donald Trump personally. What is it about and how does Trump want to squeeze China out of the American market?
The US China economic and security review commission/USCC has recommended that China be stripped of the status of permanent normal trade relations. In this way, it wants to facilitate the imposition of Trump's promised prohibitive trade duties on Chinese goods.
This is the first time that the USCC in its annual report to Congress has openly called for an end to a policy that has been a cornerstone of China's economic rise in recent decades. The Commission previously proposed in 2022 that Congress temporarily suspend China's Permanent normal trade relations/PNTR status if the U.S. Trade Representative determines that Beijing has not met its WTO commitments on access to its market.
Permanent normal trade relations status was approved by Congress for China in 2000 in exchange for Beijing agreeing to open its markets and liberalize trade practices before joining the World Trade Organization (WTO). This status obligates Washington to apply the same basic duties and privileges to Chinese goods as it does with most trading partner countries, consistent with U.S. WTO commitments.
At the same time, in October 2000, Congress created an independent USCC commission of 12 congressionally appointed commissioners. Their task was to monitor U.S. trade and security relations with China and provide U.S. lawmakers with annual reports on the issue.
Under WTO rules, the U.S. can deny a country trade benefits under national security exceptions. This motivation was used by President Biden's administration when it imposed sanctions against Russia after the conflict in Ukraine began in February 2022 (without formulating exactly what the threat to U.S. national security was).
With regard to China, U.S. lawmakers want to untie their hands in advance by creating the possibility of imposing duties/sanctions without any conditions or deadlines.
Last week, Rep. John Moolenaar, a Michigan Republican who is chairman of the House China Committee, introduced a bill to repeal the permanent national agreement for China. He cited U.S. Trade Representative Catherine Tai's assessment that China continues to pursue a “state-directed, non-market-oriented approach to the economy and trade,” which is contrary to WTO norms and principles. The bill is likely to garner support from Republicans, including Tom Cotton of Arkansas and Marco Rubio of Florida (now Donald Trump's nominee for Secretary of State), who in Trump's first term were vocal supporters of revoking PNTR status for China.
Democrats during Biden's presidency also pressed China, limiting chip shipments and raising military tensions between the two countries. But the Biden administration's ultimate goal was to force Beijing to back down and go for what the U.S. calls decoupling.
In Washington's interpretation, this would mean preserving the global economy, in which the United States would curb the development of China's high-tech sectors, leaving it to make money by supplying America with consumer goods. Chinese oligarchs have been hinted that business as usual could return for them if they could get a handle on Xi Jinping and stay out of the high-tech sector.
The Trumpists' position is different. They want to strengthen America's industrial power first and foremost. If necessary, they will sacrifice the interests of global financial conglomerates and the very existence of a unified global economy.
In this scenario, Chinese products will be hard-pressed out of the United States and a number of countries key to American economic interests. Whether China will find other markets to replace the U.S. is nobody's concern.
In a report released Tuesday, the Commission justified its recommendation to Congress to revoke PNTR status by saying that it “allows China to enjoy the same trade terms as U.S. allies, despite its practice of intellectual property theft and market manipulation.” Among the commission's findings is a recommendation that Congress repeal the de minimis exception for e-commerce goods.
That rule, enshrined in the relevant U.S. trade law, allows goods valued at less than $800 to enter the U.S. duty-free and with less regulatory oversight. USCC experts cite statements by U.S. officials that the “de minimis loophole” used by Chinese e-commerce companies Shein and Temu harms U.S. jobs and could allow Chinese companies to ship illegal products, including fentanyl-related materials, into the United States.
The report's recommended revocation of PNTR status would give the Trump administration the ability to raise duties on a wide range of Chinese products. In addition, China's lack of this status could trigger annual inspections of China's trade practices, as was done prior to PNTR approval. As one USCC Commissioner Jacob Helberg stated, “Raising duties on Chinese manufactured goods would accelerate the return of supply chains to the United States, echoing President-elect Donald Trump's argument for universal import duties.”
The Chinese embassy in Washington, D.C., immediately after the USCC report was published, reacted to its recommendations. “Attempts to return Sino-US trade and economic relations to the Cold War era violate WTO rules and will only harm the common interests of both countries and undermine the global economy,” said embassy spokesman Liu Pengyu.
In 2023, China's exports to the U.S. totaled $448 billion (2017 was $505.6 billion). China has already passed Mexico (480 billion) and is only slightly ahead of Canada (429 billion). Imports to China from the US total $147 billion. By this figure, China is in third place after Canada (352 billion) and Mexico (323 billion), which are members of the North American Free Trade Agreement (NAFTA). The U.S. trade deficit with China totaled an unprecedented $301 billion in 2023, and could increase another 4.4 percent this year.
If Trump imposes, as he has promised, 60% duties (and having accepted the USCC proposal, this will not be difficult to do), the physical volume of Chinese goods shipped to the US will shrink dramatically. The trade surplus with America will also shrink sharply for Beijing.
Even those Chinese companies that do not withdraw from the U.S. market will see their profitability plummet. And those for whom the U.S. market will be practically closed will have a very hard time. A number of companies may go bankrupt, a significant number of employees may be laid off, and budget revenues may drop.
It will be very difficult for Beijing to find a quick solution to these problems. Some of the problems can be alleviated by increasing supplies to third countries. But this cannot be done instantly, and if the potential threat becomes real, China will face hard times.
Dmitry Skvortsov
Source - Vzglyad .