The escalating trade dispute between the United States and China is detrimental to both countries and the rest of the world, according to a White Paper on China's Position on the China-US Economic and Trade Consultations.
The White Paper, issued by China's State Council Information Office in Beijing yesterday, highlights China's policy position in different areas.
It says China will not compromise on major issues of principle. China does not want a trade war, but it is not afraid of one and it will fight if necessary. China's position on this has never changed.
On tariffs, the China-US economic and trade frictions provoked by the United States damage the interests of both countries and of the wider world. On intellectual property, accusing China of theft to support its own development is an unfounded fabrication.
On trade talks, the consultations have come a long way, with the two sides agreeing on most parts of the deal. But the consultations have not been free from setbacks. Each of them is the result of a US breach of consensus, commitments and backtracking.
The Chinese government rejects the idea that threats of a trade war and continuous tariff hikes can ever help resolve trade and economic issues. Beijing says cooperation is the only correct choice for China and the US, and a win-win is the only path to a better future.
The White Paper said that the Chinese and American economies were highly integrated and together constituted an entire industrial chain in today's globalised world. The two economies are bound in a union that is mutually beneficial.
US restrictive measures worse for the rest of the world
"The restrictive measures the US has imposed on China are not good for China or the US, and still worse for the rest of the world," the White Paper said.
The US tariff measures led to a decrease in the volume of China's exports to the United States, which fell by 9.7 percent year-on-year in the first four months of 2019, dropping for five months in a row. As China has to impose tariffs as a counter-measure to US tariff hikes, US exports to China have dropped for eight months in a row.
The uncertainty brought by US-China economic and trade friction made companies in both countries more hesitant about investing. China's investment in the US continued to fall and the growth rate of US investment in China has also slowed.
Instead of boosting American economic growth, the US tariff measures have significantly increased production costs for US companies, pushed up domestic prices and undermined American people's livelihoods.
The US protectionist measures also damaged the multilateral trading system, seriously disrupted global industrial chains and supply chains, undermined market confidence, and posed a serious challenge to global economic recovery and are a major threat to the trend of economic globalisation, the White Paper said.
WTO lowers global trade growth forecast
With the outlook for China-US trade friction unclear, the World Trade Organisation (WTO) has lowered its forecast for global trade growth in 2019 from 3.7 percent to 2.6 percent.
Bloomberg studies also show that the escalation in the trade dispute between Beijing and Washington adds risks for an already-stumbling global economy.
Bloomberg Economics estimates that if tariffs expand to all areas of China-US trade, global GDP could fall 0.6 percent in just two years. That means about US$600 billion in global economic output will be wiped out. Researchers also say without a trade deal, there could be a 10 percent drop in equity markets, reducing both consumer spending and investment.
Another Bloomberg study looked at the impact on other countries. It listed countries that would suffer if China's exports to the US drop. South Korea and Malaysia would be worst hit. South Korea's output relies on Asia's export supply chain for 0.8 percent, and Malaysia for 0.7 percent. For both countries, the computer and electronics industries account for the largest share. On the other hand, Chinese tariffs on US goods could hurt countries, including Canada. In 2015, Canada relied on the supply chain for about one percent of its energy output.
Notably, the escalating trade tensions between the United States and China are taking a toll on Asian economies. In South Korea, its economy shrank by 0.3 percent in January to March from the previous quarter, marking the biggest slump in a decade. In May, its exports had declined by 9.7 percent from the previous year. Thailand's economy, known as one of the fastest-growing in Southeast Asia, is also being dragged down. It grew at its slowest pace since 2014 in the first quarter.
Leaders of many Asian nations say they do not want to be caught up in the China-US trade war.