Is this just the start of China-U.S trade war with Canada stuck in the middle?

By Farmers Forum staff
Ontario soybean and beef farmers are coming to grips with the thought that the 16-month U.S.-China trade war could mean a bumpy road for exports for some time to come. But there is hope in the air.

Former U.S. trade representative under George H.W. Bush, Carla Hills, told the South China Morning Post in Shanghai on Oct. 30 that China now has an opportunity to seize the “magic moment” in history to open up its economy by reaching an agreement with the United States.

The Chinese Communist Party released its third-quarter growth rate at 6 per cent but financial research firm MorningStar said that economic growth is not going well at a more realistic 3 per cent for the third quarter and that new U.S. tariff shocks will make things even worse for the final quarter of the year.

“China’s economy is slowing and they simply must get the growth that has been promised to their people,” Hills told the South China Morning Post. “They’re going to have to move more readily to a supply-consumer style economy from the heavy-industry and state-owned enterprises.”

Meantime, there is much talk of a “small-scale” trade deal and a possible Nov. 17 meeting between U.S. President Donald Trump and Chinese President Xi Jinping. Others see this meeting as a ceasefire, delaying the main event.

A deal this month would mean that the United States would not enforce new tariffs on Chinese-made consumer goods in exchange for China agreeing to buy large quantities of U.S. farm goods, including poultry and beef products that are now banned from China. But the deal would not include structural changes to end China’s heavy-handed dealings with U.S. companies within China and the stealing of U.S. intellectual property. One major sticking point is China’s heavy subsidies for its own industries that allow them to undercut prices of foreign competitors. While the United States wants China to end the subsidies, China is strongly resisting because it would create widespread unemployment.

The United States and China have volleyed tariffs for months. It began in July, 2018, with U.S. tariffs of 25 per cent on around US $34 billion of imports from China, including cars, hard disks and aircraft parts. China retaliated by imposing a 25 per cent tariff on 545 goods originating from the U.S. worth US $34 billion, including agricultural products, automobiles and aquatic products.

Jude Blanchette, chair in China studies at the U.S Centre for Strategic and International Studies, is not optimistic. “It’s clear that the U.S. and China are headed for a prolonged period of open strategic rivalry,” she told the South China Morning Post. “This is the consensus on both sides.”

Anyone hoping for a solution by spring planting can be forgiven for choking on the words “prolonged period,” because they sound more like a euphemism for years, not weeks. Blanchette also noted that China has no plans to move away from being a centrally-controlled economy and if that’s the U.S.’s goal, then the tariff war has only just begun. U.S.-China Business Council vice-president Jacob Parker agrees that many U.S. companies are preparing for a long term U.S.-China confrontation.

As it stands, the United States has put a 25 per cent tariff on $500 billion in goods imported from China.

Meantime, Canada is caught in the middle. Based on a request from the United States last year, Canada placed Huawei’s Financial Chief Meng Wanzhou on house arrest in Vancouver. She is wanted in the United States for violating the U.S. trade sanctions with Iran.

China retaliated and stopped buying Canadian soybeans in January, stopped buying Canadian canola in March and stopped buying Canadian beef and pork in June. China also applied pressure by jailing two Canadians for spying and placed two others on death row.

Freeing Wanzhou is no easy thing. China is Canada’s second-biggest trading partner but the United States is our biggest. Also, China has been caught in many countries around the world bribing government officials and stealing intellectual property. This year in Canada alone, 28 pro-China cultural centres were shut down in New Brunswick after the education minister called their curriculum “propaganda.”