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President Trump's trade conflicts with China hardly inconsequential: expert
Last Updated: 2017-08-29 08:21 | Xinhua
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President Trump administration's punitive actions against China would have serious consequences for U.S. businesses and consumers, said Stephen Roach, a China expert at Yale University, in a column published by Project Syndicate on Monday.

U.S. Trade Representative Robert Lighthizer formally initiated an investigation into China's intellectual property practices under Section 301 of the U.S. Trade Act of 1974. The law, once heavily used in the 1980s and early 1990s allows U.S. President Donald Trump to unilaterally impose tariffs or other trade restrictions on commodities imported from China.

"In a codependent human relationship, when one party alters the terms of engagement, the other feels scorned and invariably responds in kind. The same can be expected of economies and their leaders," said Roach, a senior fellow at Yale University's Jackson Institute of Global Affairs.

Spokesperson for China's Ministry of Commerce said last week that China would take "all appropriate measures" to defend its legal interests in response to the U.S. investigation. Taking into account of potential consequences of Chinese retaliation, Roach said there could be three economic consequences.

First, imposing tariffs on imports of Chinese goods and services would be the functional equivalent of a tax hike on American consumers. "The possibility of higher import prices and potential spillover effects on underlying inflation would hit middle-class U.S. workers, who have faced more than three decades of real wage stagnation, especially hard," said Roach.

Second, China might reduce purchase of the U.S. Treasury securities, leading to higher U.S. interest rates which could dampen economic growth.

Third, U.S. businesses could be hurt, as other countries might curtail U.S. access to their markets in retaliation. "That could severely undermine the manufacturing revival that seems so central to the Trump presidency's promise to 'Make America Great Again' ," Roach added.

"America does not hold the trump card in its economic relationship with China," said Roach," Getting tough on China while ignoring those consequences could be a blunder of epic proportions."

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