China has added its voice to a growing chorus of concern about the rising threat of a trade war and tariffs that U.S. President Donald Trump is expected to impose on steel and aluminum imports later this week.

 

A top Chinese diplomat says that while Beijing does not want a trade war with Washington, it will defend its interests if necessary.

 

Speaking at a press conference ahead of China’s annual legislative meetings, Vice Foreign Minister Zhang Yesui also gave assurances that the rise of world’s second largest economy and a rise in military spending was no cause for alarm.

 

“China does not want a trade war with the Untied States, but we will absolutely not sit idly by and watch as China’s interests are damaged,” Zhang said.

 

Tit for tat

Last week, the U.S. president announced plans to slap tariffs of 25 percent on steel and 10 percent on aluminum imports.

 

China is a key country Washington is aiming to target with the tariffs, but the decision also has sparked a global backlash with leaders of other affected nations such as Canada and Europe, which are warning they, too, are prepared to take countermeasures.

 

Analysts have said that if President Trump follows through on his pledges to get tough with China on trade, Beijing could respond by targeting the airline and agricultural sectors, even focusing on communities in the United States where support for the president was strong during the 2016 election.

 

Zhang, who also is serving as the rotating spokesperson of the National People’s Congress (NPC) said the best way to improve trade is to open up markets further and expanding the “pie of cooperation.”

 

“If policies are made on the basis of mistaken judgments or assumptions, it will damage bilateral relations and bring about consequences that neither country wants to see,” Zhang said.

 

Rising concerns about a trade war are likely to be a hot topic during the annual political meetings. China’s Premier Li Keqiang will deliver a government work report on Monday to the NPC during its opening session. That speech may highlight Beijing’s concerns as it forecasts the government outlook for the economy in 2018.

 

Moderate increase

The report also will provide details about another closely watched item, China’s military spending.

 

Zhang said China will see a moderate increase in its military budget this year, but argued that was to make up for a shortfall from previous years, upgrade equipment, and improve training and living conditions at the grassroots level for troops, among other reasons.

Zhang did not say how much of a percentage increase China might see this year in its defense spending, but he stressed that the country’s military does not threaten anyone.

 

Analysts tell VOA that spending could grow by about 10 percent, but they note that the real figure is perhaps much larger.

 

“China’s defense budget takes up a smaller share of its gross domestic product [GDP] and national fiscal expenditure than other major world countries. Its military spending per capita is also lower than other major countries,” he said.

 

Last year, China disclosed that it spent nearly $165 billion on its military about one-fourth of what the United States plans to spend on defense this year.

 

China model

Despite assurances, China’s broader strategic intentions are still something that Washington and other countries in the region watch closely.

 

Under Xi Jinping’s leadership, China has begun assuming a bigger role on the global stage and has launched several initiatives of its own, including a massive trillion-dollar trade and infrastructure project called the “Belt and Road” initiative.

During this year’s annual meetings, China’s communist party aims to solidify its self-proclaimed position as the only political organization qualified to rule the country, with the passage of 21 constitutional amendments.

 

One key amendment in the package is a proposal to scrap restrictions regarding the number of terms the president can serve in office. The proposal paves the way for Xi to become China’s president indefinitely, although state media denies Xi will be granted tenure for life.

When asked, Zhang did not respond to the question of whether the changes would give Xi lifelong tenure. He only said that the amendments would help unify the country’s leadership under Xi as China’s “core leader.”

 

The proposal, along with China’s growing ambitions to showcase what it calls the China model or “China Solution” has led to concerns that Beijing’s communist leaders will seek to spread their model of rule.

 

Zhang said that each country has its own development path and model, and Beijing will not import models from other countries, nor will it export its own.

 

“We will not ask other countries to copy China’s practices, but of course if some countries are interested in learning China’s experiences and practices, we are ready and willing to share our experiences with them,” Zhang said.

 

Zhang added that China will not impose anything on others and has no intention of overthrowing the existing international order or trying to start again.

 
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The EU will soon unveil a plan for taxing major internet companies like Amazon and Facebook by imposing a levy of two to six percent on revenues in every country where they operate, French finance minister Bruno Le Maire said Sunday.

“The range will be from two to six percent; but closer to two than to six,” Le Maire told the Journal du Dimanche newspaper.

The European Commission has said it will present by end March an overhaul of its tax rules, which currently allow US digital economy giants to report their income from across the bloc in any member state.

That leads them to pick low-tax nations like Ireland, the Netherlands or Luxembourg, depriving other nations of their share of the revenue even though they may account for more of a company’s earnings.

“The heads of these companies know themselves that this system can’t continue,” Le Maire said.

Critics say the tax-avoidance strategies used by the tech titans known as GAFA — Google, Amazon, Facebook and Apple — deprive EU governments of billions of euros while giving them an unfair advantage over smaller rivals. 

The Organisation for Economic Cooperation and Development says such strategies cost governments around the world as much as $240 billion (195 billion euros) a year in lost revenue, according to a 2015 estimate.

Asked if the proposed rate might be criticised as too low, Le Maire said: “I would rather have a law that can be implemented quickly instead of drawn-out negotiations.”

American tech giants appear to believe the European tax revamp is in the cards, with several already announcing pledges to pay more in each country where they operate as governments step up their fiscal demands.

Amazon said last month that it had settled a major tax claim in France and that it would start declaring all its earnings in the country.
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President Donald Trump threatened on Saturday to impose a tax on European cars if the European Union chooses to retaliate against his plans to place tariffs on imported steel and aluminum.

In a tweet Saturday morning, Trump said the U.S. had an “$800 Billion Dollar Yearly” trade imbalance because of “very stupid” trade deals and policies. He warned that if the EU increased “tariffs and barriers” against American-made products, “we will simply add a Tax on their Cars.”

Presently, the U.S. imposes a 2.5 percent tariff on European-built cars and Europe imposes a 10 percent tariff on U.S.-built cars.

Earlier this week, Trump announced that he plans sometime in the coming week to impose tariffs of 25 percent on steel and 10 percent on aluminum imports. He said the tariffs would be in effect for a long period of time.

Trump’s tweet Saturday appeared to be in response to European Commission President Jean-Claude Juncker’s warning that the EU could respond by taxing quintessentially American-made products, such as bourbon whiskey, blue jeans and Harley-Davidson motorcycles.

Juncker told German media Friday that he does not like the words “trade war.” “But I can’t see how this isn’t part of warlike behavior,” he said.

Trump had tweeted earlier in the day: “Trade wars are good, and easy to win.”

Trump’s announcement, made during a meeting with steel and aluminum industry executives at the White House, led a sharp drop in the U.S. markets and sparked concerns of a trade war Friday.

China, Canada respond

Later Friday, China warned about the “huge impact” on global trading if Trump proceeds with his tariff plans.

Wang Hejun, head of China’s commerce ministry’s trade remedy and investigation bureau, said in a statement the tariffs would “seriously damage multilateral trade mechanisms represented by the World Trade Organization and will surely have huge impact on normal international trade order.” 

The Chinese official added, “If the final measures of the United States hurt Chinese interests, China will work with other affected countries in taking measures to safeguard its own rights and interests.”

China ranks 11th among the countries that export steel to the U.S. 

Canada is the United States’ biggest foreign source of both materials.

Canadian Prime Minister Justin Trudeau said Friday that Trump’s tariff plans were “absolutely unacceptable.” He said he is prepared to “defend Canadian industry” and warned the tariffs would also hurt U.S. consumers and businesses by driving up prices.

The director of the World Trade Organization, Roberto Azevedo, responded coolly, saying, “A trade war is in no one’s interests.” 

Trump spent Friday defending his threat to impose the tariffs, saying potential trade conflicts can be beneficial to the United States.

“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump wrote in a post on the social media site Twitter. “Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore – we win big. It’s easy!” 

A Japanese government official told VOA that Tokyo “has explained several times to the U.S. government our concerns,” but declined to comment further on any ongoing discussions with Washington.

“While we are aware of the president’s statement, we understand that the official decision has not been made yet,” the Japanese official said. “If the U.S. is going to implement any measures, we expect the measures be WTO-rules consistent.” 

China on Friday expressed “grave concern” about the matter. 

Trump said Thursday the tariffs of 25 percent on steel and 10 percent on aluminum imports will be in effect for a long period of time. He said the measure will be signed “sometime next week.” 

In 2017, Canada, Brazil, South Korea and Mexico accounted for nearly half of all U.S. steel imports. That year, Chinese steel accounted for less than 2 percent of overall U.S. imports.
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The tiny Marshall Islands is creating its own digital currency in order to raise some hard cash to pay bills and boost the economy.

The Pacific island nation said it became the first country in the world to recognize a cryptocurrency as its legal tender when it passed a law this week to create the digital “Sovereign,” or SOV. In the nation of 60,000, the cryptocurrency will have equal status with the U.S. dollar as a form of payment.

Venezuela last month became the first country to launch its own cryptocurrency when it launched the virtual Petro, backed by crude oil reserves. The Marshall Islands said the SOV will be different because it will be recognized in law as legal tender, effectively backed by the government.

​Israeli partners

The Marshall Islands is partnering with Israeli company Neema to launch the SOV. It plans to sell some of the currency to international investors and spend the proceeds.

The Marshall Islands says the SOV will require users to identify themselves, thus avoiding the anonymity that has kept bitcoin and other cryptocurrencies from gaining support from governments.

“This is a historic moment for our people, finally issuing and using our own currency, alongside the USD (U.S. dollar),” said President Hilda Heine in a statement. “It is another step of manifesting our national liberty.”

The Marshall Islands is closely aligned with the U.S. under a Compact of Free Association and uses the dollar as its currency. Under the compact, the U.S. provides the Marshall Islands with about $70 million each year in assistance. The U.S. runs a military base on Kwajalein Atoll.

Lawmakers passed the cryptocurrency measure Monday following five days of heated debate. It’s unclear when the nation will issue the currency.

Leaders hope the SOV will one day be used by residents for everything from paying taxes to buying groceries.

Initial offering: 24 million

The law states that the Marshall Islands will issue 24 million SOVs in what it calls an Initial Currency Offering. Half of those will go to the government and half to Neema.

The Marshall Islands intends to initially sell 6 million SOVs to international investors. It says it will use the money to help pay the budget, invest in projects to mitigate the effects of global warming, and support those people still affected by U.S. nuclear testing.

The country also intends to hand out 2.4 million SOVs to residents.

Neema Chief Executive Barak Ben-Ezer said the SOV marked a new era for cryptocurrency.

“SOV is about getting rid of the excuses” for not shifting to digital assets, he said in a statement. He said it solved a huge problem with cryptocurrencies, which haven’t previously been recognized as “real” money by banks, regulators and the U.S. Internal Revenue Service.

Some lawmakers expressed concern about the large amount of the new currency that would go to the Israeli company, while others argued the country had urgent needs and the cash would help.

Jehan Chu, the Hong Kong-based co-founder of blockchain platform Kenetic, said he thought it was an amazing move by the Marshall Islands and was the way of the future.

“Physical currency is going by the wayside as an antiquated, obsolete form of transacting,” he said.

But Chu added that he didn’t think the currency would hold much appeal for international investors or be particularly valuable outside the Marshall Islands.

And many people in the Marshall Islands and beyond remain skeptical of cryptocurrencies.

Bank of England Governor Mark Carney this week said a global speculative mania had encouraged a proliferation of the currencies, and that they needed to be held to the same standards as the rest of the financial system.

“The prices of many cryptocurrencies have exhibited the classic hallmarks of bubbles … reliant in part on finding the greater fool,” Carney said in a speech to the Scottish Economics conference in Edinburgh.
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In agitating for a trade war, President Donald Trump may have forgotten William Tecumseh Sherman’s adage that “war is hell.”

The Civil War general’s observation can be apt for trade wars, which may create conditions for a shooting war.

A look at Trump’s spoiling-for-a-fight tweet Friday:

TRUMP: “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”

THE FACTS: History suggests that trade wars are not easy.

The president’s argument, in essence, is that high tariffs will force other countries to relent quickly on what he sees as unfair trading practices, and that will wipe out the trade gap and create factory jobs. That’s his motivation for announcing that the U.S. will impose tariffs of 25 percent on steel imports and 10 percent on aluminum imports.

The record shows that tariffs, while they may help certain domestic manufacturers, can come at a broad cost. They can raise prices for consumers and businesses because companies pass on at least some of the higher costs of imported materials to their customers. Winning and losing isn’t as simple a matter as tracking the trade gap.

The State Department’s office of the historian looked at tariffs passed in the 1920s and 1930s to protect farms and other industries that were losing their markets in Europe as the continent recovered from World War I. The U.S. duties hurt Europe and made it harder for those countries to repay their war debts, while exposing farmers and consumers in the U.S. to higher prices. European nations responded by raising their tariffs and the volume of world trade predictably slowed by 1934.

The State Department says the tariffs exacerbated the global effects of the Great Depression while doing nothing to foster political or economic cooperation among countries. This was a diplomatic way of saying that the economic struggles helped embolden extremist politics and geopolitical rivalries before World War II.

Nor have past protectionist measures saved the steel industry, as Trump says his tariffs would.

The United States first became a net importer of steel in 1959, when steelworkers staged a 116-day strike, according to research by Michael O. Moore, a George Washington University economist. After that, U.S. administrations imposed protectionist policies, only to see global competitors adapt and the U.S. share of global steel production decline.
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China has warned about the “huge impact” on global trading, if U.S. President Donald Trump proceeds with his plans to impose 25 percent tariffs on imported steel and 10 percent on imported aluminum products.

Wang Hejun, head of China’s commerce ministry’s trade remedy and investigation bureau, said in a statement late Friday the tariffs would “seriously damage multilateral trade mechanisms represented by the World Trade Organization and will surely have huge impact on normal international trade order.”

The Chinese official added, “If the final measures of the United States hurt Chinese interests, China will work with other affected countries in taking measures to safeguard its own rights and interests.”

Allies weigh in

Meanwhile earlier Friday, Canadian Prime Minister Justin Trudeau said Trump’s tariff plans were “absolutely unacceptable.”

Trudeau said Friday he is prepared to “defend Canadian industry.” Canada is the United States’ biggest foreign source of both materials. He warned that the tariffs would also hurt U.S. consumers and businesses by driving up prices.

The European Union was also stung by Trump’s plan, as evidenced by European Commission President Jean-Claude Juncker’s warning that the EU could respond by taxing quintessentially American-made products, such as bourbon whiskey, blue jeans and Harley-Davidson motorcycles.

Juncker told German media Friday that he does not like the words “trade war.” 

“But I can’t see how this isn’t part of warlike behavior,” he said.

Trump had tweeted earlier in the day: “Trade wars are good, and easy to win.”

The director of the World Trade Organization, Roberto Azevedo, responded coolly, saying, “A trade war is in no one’s interests.”

Currency markets 

The currency market responded with a drop in the value of the U.S. dollar against most other major currencies. It ended the day at its lowest level against the yen in two years. The euro gained a half-percent against the dollar Friday.

And the Dow Jones Industrial Average finished the trading week with its fourth decline in as many days, ending at 24,538.06. The Nasdaq and S&P 500, however, rose slightly after a three-day losing streak.

Trump spent Friday defending his threat to impose the tariffs, saying potential trade conflicts can be beneficial to the United States.

A Japanese government official told VOA that Tokyo “has explained several times to the U.S. government our concerns,” but declined to comment further on any ongoing discussions with Washington.

“While we are aware of the president’s statement, we understand that the official decision has not been made yet,” the Japanese official said. “If the U.S. is going to implement any measures, we expect the measures be WTO-rules consistent.”

Trump said Thursday the tariffs of 25 percent on steel and 10 percent on aluminum imports will be in effect for a long period of time. He said the measure will be signed “sometime next week.”

In 2017, Canada, Brazil, South Korea and Mexico accounted for nearly half of all U.S. steel imports. That year, Chinese steel accounted for less than 2 percent of overall U.S. imports.
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