Michael Schuman
Aglobal trade war is starting, and China is at the center of it. A reckoning for Beijing’s economic model, which is designed to promote Chinese industry at the expense of the rest of the world, has long been coming. China’s trading partners have had enough. The result will be a wave of protectionism, with potentially dire consequences for both China and the global economy.
The most obvious and dramatic evidence for this was unveiled yesterday by President Joe Biden, who announced that his administration would quadruple the existing tariffs on imported Chinese electric vehicles, to 100 percent. He will also hike tariffs on steel, aluminum, medical equipment, semiconductors, solar cells, and lithium batteries. The Chinese government instantly protested and threatened action of its own. “The United States should immediately correct its wrong practices,” the Chinese Ministry of Commerce said in a statement. “China will take resolute measures to defend its own rights and interests.”
Yet China’s leaders have no one to blame but themselves. They joined a global trading system and then gamed that system. Biden’s tariffs are the natural response, though not an entirely positive one. Protectionism raises costs, hurts consumers, shields unworthy companies from competition, and punishes worthier ones. Disputes over trade will only intensify the rivalry between the world’s two great powers.
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