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Trade war dampens competitiveness of American enterprises: scholar

By Zhang Mengxu (People's Daily)    13:18, October 30, 2018

Washington’s tariff policy couldn’t solve its own trade imbalance, and starting a trade war could harm the competitiveness of the American enterprises, hurt the interests of US consumers and bring negative influence to the US economy, said a senior researcher on global economy.

A big part of the Chinese products subjected to the $200 billion tariffs are intermediate goods for American industry chains, David Dollar, a senior fellow of John L. Thornton China Center and global economic development project of Brookings Institution, told People’s Daily.

The additional tariffs will become a heavy burden for the US enterprises, he said, noting that if the tariff rate is elevated to 25 percent next year as planned, the American economy will have to pay high price for this, and the consumers will strongly feel the impact.

He took the auto industry as an example, saying the high tariffs will increase the cost of auto parts and therefore cause a rise of auto prices, which will eventually be a burden on the consumers.

The trade war won’t narrow the US trade deficit with China, Dollar pointed out. The surplus or deficit of a country’s current account is decided by the balance between its savings and investment. To cut current-account deficit, a country has to enlarge savings, and the most effective way to achieve this is tax increase.

However, the Trump administration is moving toward the opposite direction, Dollar pointed out, adding that because of Trump’s tax cut, the US is facing higher trade deficit pressure this year.

The researcher said he doesn’t believe that the current-account deficit or surplus means a great issue for China and the US. China’s economy shows much lower dependence on foreign trade, and its growth is mainly driven by domestic demand¸ he explained.

Dollar said the trade frictions between the two largest economies will possibly impact global economic growth this year.

The American researcher, who has been in China for 9 years as World Bank's Country Director for China and Mongolia, an economic and financial emissary of the US Department of the Treasury, is a witness of China’s reform and opening- up course.

Dollar said China has undergone great changes in the last 40 years. A large proportion of the Chinese export value is created by private-owned enterprises, he stressed, adding that China’s development and changes have proved the success of reform and opening-up.

The trade war was started because of political reasons in the US, Dollar said, suggesting the US resolve economic and trade frictions, as well as appeals through dialogue and negotiations.

The trade war goes against the common interests of the China and the US. Even the allies of the US are not for it initiating the trade war unilaterally, he said, warning that such move of Washington has in fact isolated itself in the international community.

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