US government's arbitrary and aggressive 'reciprocal tariffs' and their dangerous consequences

Editor's note: The article, written by Peng Delei, a professor of the school of law at East China University of Science and Technology, reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity.

Recently, the US government has introduced "reciprocal tariffs" in an attempt to rebalance global trade flows. However, this approach, capricious in execution and arbitrary in rationale, has undoubtedly antagonized its trade partners and is bound to provoke widespread backlash.

First and foremost, the US government's push for "reciprocal tariffs" rests on a flawed premise. The "reciprocal tariffs" are intended to alleviate long-standing trade deficit pressures, bring manufacturing back to the US territory, and restore its competitive edge in global trade. However, this strategy lacks factual and legal basis. The US government has long been concerned about trade imbalances, which were once again emphasized at the recent World Economic Forum in Davos. It even went so far as to blame the Biden administration for exacerbating this problem. However, the assumption that trade deficits are primarily caused by tariff and non-tariff barriers and that such deficits alone warrant reciprocal tariffs is overly simplistic. Attempting to break down bilateral trade balances through reciprocal tariffs runs counter to the economic principle of comparative advantage. At the same time, it must be noted that the US' long-term policies such as export controls on high-tech goods are themselves a major reason behind its persistent trade deficits with certain trade partners.

Secondly, the US government's promotion of "reciprocal tariffs" is driven by a misguided desire to "settle old scores". The imposition of tariffs on all trade partners seems rooted in an erroneous mindset that the US has historically suffered losses in global trade progress and that it must "settle old scores". The "reciprocal tariffs" policy focuses on trade balance, but conveniently overlooks the substantial benefits the US has persistently reaped from globalization and the existing international economic order, while also disregarding the balance of interests achieved through multilateral trade negotiations. It is important to remember that the WTO rules system is not only limited to goods trade but also covers services trade, trade-related intellectual property rights, and more. Since the WTO's founding in 1995, the US has benefited significantly from access to the service market and the intellectual property rules system, which is widely acknowledged.

Thirdly, the implementation of "reciprocal tariffs" by the US government risks turning into a game of whack-a-mole. Once such tariffs are in place, US importers will inevitably shift their sourcing from high-tariff countries to lower-tariff ones. Former buyers and sellers will have to find new exporters and importers, driving up transaction costs. As noted by Morris, an expert at the Peterson Institute for International Economics, reciprocal tariffs could ultimately turn into a whack-a-mole scenario, a vicious competition with no real winners.

Not only do reciprocal tariffs undermine US interests, but they also inflict tremendous damage on the global economy. 

To begin with, the "reciprocal tariffs" are damaging the current system of global trade rules. The series of tariff measures recently implemented by the US government violates WTO's most-favored-nation treatment and tariff-binding obligations. The US disregards WTO rules and commitments made by WTO members, casting aside the most basic international rules and trade values. This "declaration of economic independence" under the guise of "Making America Rich Again" is clearly unsustainable.

Moreover, the "reciprocal tariffs" are tearing apart the already fragile system of global trust. These measures are bound to trigger retaliatory responses, not only from the US' major trade partners such as China and the EU but also from its traditional allies like the UK and Australia. At the same time, in response to the US' trade measures, less-affected countries may find themselves under pressure to pick sides. This will only further fragment the global trust system already strained by geopolitical tensions. The spillover of distrust may extend into areas such as international investment, dealing yet another blow to the already struggling global economy.

Furthermore, the "reciprocal tariffs" are disrupting the global industrial and supply chain systems. These measures are poised to deteriorate the international trade and business environment, with micro-level consumers and enterprises bearing the brunt. As a result, consumers will face rising living costs, while enterprises will have to alter product origins, shift export destinations, and find new trade partners, all of which will incur significant costs. The WTO recently warned that a series of trade measures, including the "reciprocal tariffs", could lead to a contraction of approximately 1 percent in global merchandise trade volume this year.

In response to the US government's "reciprocal tariff" policy, the Chinese government has effectively utilized its "legal toolbox" to counteract, reflecting its firm stance against current trade protectionism and unwavering determination to safeguard national security and development interests. "He who finds the proper course has many to assist him. He who loses the proper course has few to assist him." The US' "reciprocal tariff" measures reflect a zero-sum mindset rather than a pursuit of mutual benefit and win-win cooperation. They have already sparked widespread discontent among its trade partners and are doomed to fail.