09:41 GMT +314 November 2018
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    U.S. President Donald Trump gives out pens he used to sign presidential proclamations placing tariffs on steel and aluminum imports to workers from the steel and aluminum industries at the White House in Washington, U.S. March 8, 2018

    China to Come Up With Retaliation to Trump's 'Carrots and Sticks Policy' - Prof

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    The White House is reportedly preparing a tough 30 billion dollar tariff package on imported Chinese goods. The package was presented by US Trade Representative Robert Lighthizer as a response to alleged intellectual property theft by China.

    Sputnik discussed the issue with Yifan Zhang, Associate Professor of the Department of Economics at The Chinese University of Hong Kong.

    Yifan Zhang: Most people are not surprised, it is very likely that Mr. Trump will introduce new tariffs and trade restrictions on China given all the earlier actions on solar panels to steel and aluminum tariffs, I think it's just a matter of time.

    READ MORE: Germany's Altmaier Going to US to Prevent Trump From Expanding Tariffs - Reports

    Sputnik: What has been pretty much approved already are the tariffs that will be taking place within the next two weeks on steel and aluminum, can you talk about the impact of that on the Chinese economy and what you expect the impact of that to be on the US economy as well?

    Yifan Zhang: The direct impact would be quite small, for the steel, for example, China accommodated for about 2% of the total US steel imports, so the revenue effect on China is limited. In today's world, the globalized world through the value chain, for example, a lot of Korean export of steel to the US actually comes from China, so it would affect China more than the 2% it suggests, but unilateral actions rarely succeed, they have little effect.

    Sputnik: What items do you think are going to be affected? How can you explain this return to a very harsh attitude toward Chinese trade from Trump?

    Yifan Zhang: During his campaign Mr. Trump promised to be tough on China, but in his first year in office he was not so tough, maybe he needed cooperation from China of North Korean issues, maybe he had other concerns, but the reason his actions signaled a shift of the strategy of Mr. Trump, he is a businessman, he knows how to use carrots and sticks. So in the first year, it was more about carrots rather than sticks, now there's a shift of strategy and he'd probably use more sticks than carrots.

    READ MORE: US Trade Tariffs - the Straw That Could Break the Camel's Back

    Sputnik: Do you think that the success or non-success of the talks with Kim Jong-un will have an effect on Trump's stance on Chinese tariffs?

    Yifan Zhang: I think this is certainly an important part of the equation in Mr. Trump's calculation, he said explicitly that the Chinese have been helping with North Korean issues and we can help put aside economic disputes, trade disputes and now that there's new progress on North Korean issues that would certainly affect his calculation.

    Sputnik: What can you say about the change we had Rex Tillerson and now we have Mike Pompeo is that also going to be a reason for a change in attitude toward China?

    Yifan Zhang: When it comes to China policy I think he also faces internal oppositions and disagreements and he had to deal with this, I think the personnel change definitely has an impact on US-China relations.

    Sputnik: Some experts actually believe that Trump's tariffs are going to hurt American families, what do you think the overall impact of these tariffs will have on the US economy?

    Yifan Zhang: Chinese exports actually benefit US consumer welfare tremendously, holding the income constant, if you can reduce the price of the consumer goods that effectively increases the purchasing power of consumers, but consumers are disorganized they're not as powerful as the special interest groups, as the lobbyists, so I would agree that it will affect consumer welfare and it will also affect producers that use Chinese imports as intermediate goods, there are also a lot of American companies in China and they probably wanted more from the Chinese government but they don't want a trade war and they will be the big loser in the trade war.

    Sputnik: The ugly world trade war, do you think China is going to introduce countermeasures? Are we going to see a trade war between the US and China?

    Yifan Zhang: I think China is almost sure to come up with a retaliation package, I don't expect a full-scale trade war between the US and China because in today's world, because of the global value chain you can't hurt your trading partner without hurting yourself. It is in everyone's interest to avoid a full-scale trade war.

    READ MORE: China Vows Response if US Imposes New Trade Tariffs on Beijing

    Sputnik: What kind of countermeasures can you imagine China might consider against the US in response to this new tariff package?

    Yifan Zhang: I think the US cultural goods are vulnerable targets and other targets could range from Boeing aircraft or high-tech firms like Apple.

    The views and opinions expressed by Yifan Zhang are those of the speaker and do not necessarily reflect those of Sputnik.

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    tariffs, policy, trade, Donald Trump, China, United States
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