The Chinese government is again rattling its saber at Taiwan—this time, by dismantling parts of a 14-year-old trade agreement and levying economic sanctions against the country.
Beijing has announced that it plans to reinstate tariffs on 134 imports from Taiwan over the course of the coming weeks. China’s Ministry of Finance said the suspension of duty concessions, which were laid out in the 2010 Economic Cooperation Framework Agreement, will go into effect on June 15.
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The decision will impact a multitude of goods, from lithium-ion batteries to oils for lubricants, bicycles, golf products and textiles.
Newly elected Taiwanese President Lai Ching-te has been blamed by China for the breakdown in negotiations, though the official took office just two weeks ago. Chinese state media on Friday quoted Chen Binhua, a spokesperson for Beijing’s Taiwan affairs office, saying that the trade action was provoked by the “separatist acts” perpetuated by Taiwanese authorities.
President Lai and his cabinet are resolute about preserving Taiwan’s independence. In his inaugural address, Lai said he wanted to “declare to all that democracy and freedom are Taiwan’s unwavering commitments.”
He also called on China directly to “cease their political and military intimidation against Taiwan, share with Taiwan the global responsibility of maintaining peace and stability in the Taiwan Strait as well as the greater region, and ensure the world is free from the fear of war.”
Following the trade breakdown, Binhua said in a statement that “There will be no peace for pursuing ‘Taiwan independence,’ nor will there be development.” Lai’s administration in turn condemned the end of the tariff concessions. Chiu Chiu-cheng, the head of Taiwan’s Mainland Affairs Council, said China would bear “full responsibility for letting the cross-strait trading relationship drift away.”
The levying of duties is hardly China’s first act of intimidation against Lai for his dedication to maintaining Taiwan’s autonomy. Three days after his inauguration, Beijing held large-scale military exercises in the Taiwan strait and carried out mock-strikes with 30 aircrafts that crossed over into Taiwan’s air defense identification zone.
Beijing’s growing aggression toward its island neighbor is spilling over into its already-contentious relationship with Washington.
The Chinese government took aim at U.S. Secretary of State Antony Blinken for congratulating Lai on the presidential win, and sanctioned a dozen U.S.-based defense companies for selling arms to Taiwan—a retaliatory move that mirrors the U.S. sanctions levied against Chinese corporations accused of supplying entities with ties to Russia.
Last week, in its first trilateral meeting with Japan and Korea to re-establish working trade ties, China urged its Asian neighbors to reject America’s protectionist policies and resist forming exclusionary trade “blocs” at the behest of the U.S.
At an event hosted by the Center for China and Globalization (CCG), American economist Stephen Roach seemed to echo the sentiment, calling U.S.-China trade war “a worrisome development and potentially a big deal.” In fact, the growing rift between the superpowers is “probably the single greatest threat to the overall global growth dynamic in the years ahead,” the senior fellow at Yale University’s Jackson Institute for Global Affairs said.
According to Roach, the Covid-19 pandemic precipitated a dramatic slowdown in China’s overall contribution to global economic growth—and the country often cited as the “World’s Factory” may see that distinction revoked in the coming years.
“China is still the most powerful engine in the world, but the power of the engine is diminishing,” he said. “The idea that we’re talking about China as being in and of itself enough to account for over 30 percent of global growth needs to be rethought.”
Shunning China is a “huge strategic mistake driven by election-year politics in the United States,” he believes. “To take a protectionist stand against a country like China that has a comparative advantage in producing the non-carbon alternative energy products that a world in the grips of climate change desperately needs is a blunder potentially of historic proportions, in my view.”
What’s more, Roach said the U.S. government’s desire to shrink its trade deficit with China has gone overboard, and the supply chain diversification that’s taken place as a result has only served to move production to other more expensive locales. China’s share of the U.S. trade deficit has decreased from its 2015 peak of about 50 percent to 21 percent in 2023.
“All we’ve done is we’ve diverted trade away from China toward other nations that have picked up the slack…Mexico, Vietnam, Canada, South Korea, Taiwan, India, Ireland, and Germany,” Roach said. “If you decompose their share of U.S. imports, 70 percent of that collection of nations are higher-cost producers than the U.S. So our trade policies are actually imposing the functional equivalent of tax hikes on American workers.”
The U.S. government and American industry have been keen to reduce reliance on China through nearshoring and “friendshoring.” But America’s trade deficit with the rest of the world is growing, even if China’s share is shrinking, according to the U.S. Commerce Department. Data released Thursday showed that the U.S. trade deficit widened by 7.7 percent in April to $99.4 billion in April—the biggest deficit since May 2022, and well above the expectations of many economists.
With these issues as a backdrop, more pressure on U.S.-China trade could precipitate an unwelcome shock to the global economy in the coming years, Roach believes. “With pressures building to this very day in the South China Sea, the Taiwan Strait, the new tariffs that President Biden is imposing on China, this is something to take very seriously and something that we must stand up and say no to today if we are serious about defending the strength and resilience of the global economy,” he said.
Source Agencies
