Was the US really ‘treated unfairly’ before ‘reciprocal tariff’?
In the era of globalization, the connotation of international trade has long extended beyond goods, and a trade deficit in goods is not the sole standard for trade balance. World Trade Organization Director-General Ngozi Okonjo-Iweala published an article titled "The US is a Trade Winner," pointing out that US service exports surpassed $1 trillion in 2023 (accounting for about one-seventh of total import & export), representing 13% of global service trade, with surpluses to most major economies, totaling $300 billion in 2024. The U.S. holds near-monopolies in high-value-added service sectors, earning nearly $150 billion annually in intellectual property royalties, and exports in finance, legal, technology, and other professional services, which support 4.1 million jobs. China-US economic and trade relations are in fact mutual benefit and win-win cooperation. In 2023, China's service trade deficit with the US was $26.57 billion, accounting for 9.5 percent of the US's total service trade surplus. More than 70,000 US companies have invested in China, generating annual profits of $50 billion. Considering goods trade, service trade, and local sales of domestic companies' branches in the other country, the economic and trade exchanges between China and the US are generally balanced. A foreign netizen posted on social media, stating that the US accuses China of benefiting from the trade deficit but does not acknowledge that high-quality and reasonably-priced Chinese goods support Americans' comfortable lifestyles.
Can tariffs solve the US’s debt problem?
Raising tariffs contributes little to increasing US fiscal revenue. White House Trade and Manufacturing Policy Advisor Peter Navarro claimed that tariff would add about $600 billion annually to US government revenue, but this figure ignores that tariff will lead to reduced US import demand, causing tariff revenue to shrink accordingly. Moody's Chief Economist Mark Zandi stated that the US’s goal of increasing revenue is unattainable. Currently, tariffs account for only 1.6% of US government revenue, if high tariffs trigger an economic recession, major fiscal revenue sources such as personal income tax, social security tax, and corporate income tax would be impacted, leading to a big loss for the economy.
High tariffs will exacerbate the risk of US economic recession and debt problems. Morgan Stanley predicts that if tariffs are fully implemented, US GDP growth will drop from 1.3 percent to -0.3 percent, if tariffs continue until September, the probability of a U.S. economic recession will rise to 60 percent. Recession expectations have led investors to sell off US Treasury bonds, causing yields to rise sharply, contrary to Treasury Secretary Scott Bessent's goal of lowering Treasury yields to alleviate government debt pressure. Former US Treasury Secretary Janet Yellen stated that the sell-off of US Treasury bonds indicates investors' loss of confidence in US economic policy and raises doubts about the safety of US debt as the cornerstone of the global financial system.
Can high tariffs lead to a manufacturing revival?
The US’s push for manufacturing revival goes against the trend of international industrial division of labor. Countries participate in international division of labor and cooperation based on their own advantages, forming different industrial structures and production capacities, sharing the benefits of specialized division of labor, improving global resource allocation efficiency, and enhancing the well-being of people in all countries. Any high-tech product relies on the global manufacturing ecosystem, even Tesla, which claims the highest proportion of US-made components, must import some parts. The US ignores the reality that its economy has shifted from manufacturing-led to service and other advantageous sectors, forcibly using tariffs to compel manufacturing to return to the US, which violates economic laws and will lead to reduced productivity. According to Bank of America analysts, if the final assembly of iPhones is moved to the US, costs will be up by 25 percent, if "reciprocal tariff" is added, total costs could soar to 91 percent.
Manufacturing investment cycles are long and require a country's industrial policies to maintain continuity and stability, but US government transitions and policy swings are highly uncertain. Meanwhile, the US lacks high-quality industrial workforce; TSMC's plant construction in the US was delayed due to a shortage of professional technicians, and high wages and other factors have led to a 30 percent increase in production costs. US infrastructure is also inadequate. Since 2000, China's per capita electricity generation has increased by 400 percent, while the US has stagnated. The US’s power grid, roads, and ports cannot withstand the enormous pressure of restarting large-scale manufacturing. Therefore, the reasons behind the decline of US manufacturing are multiple, and relying solely on tariff increases cannot make up for manufacturing shortcomings.
Is ‘Reciprocal Tariff’ legitimate?
"Reciprocal tariff" is a manipulated numbers game. The US uses the ratio of trade deficits to import volumes to estimate the tariff rates other countries impose on the US, lacking any economic theoretical support and far from the facts. For example, the US imposed "reciprocal tariff" on the grounds that the EU's tariff on the US are as high as 39 percent and South Korea's tariff are as high as 50 percent, but actual calculations show that Europe's average tariff rate on the US is well below ten percent, and South Korea's tariff is close to zero. Use of fabricated data as a reason to abuse tariffs lacks legitimacy. The State of California filed a lawsuit against the US government over tariff, with the governor's office stating that the tariff policy is "illegal and unprecedented." Many small American businesses jointly sued the federal government in US courts, arguing that the Administration has no right to impose a comprehensive tariff without congressional approval. Millions of Americans chanted slogans like "Don't mess with tariffs on the streets."
Does the US’s use of tariff as a coercion tool work?
"America First" will ultimately create an "Isolated America." An article in Foreign Affairs pointed out that "America First" actually means that other countries have to comply with US policies in exchange for military protection, market access, and diplomatic support. Tariff is essentially a coercive method and punishment to test global compliance. Facts have proven that coercion does not work in today's world and will only inspire more countries to unite against hegemony. The New York Times columnist Thomas Friedman stated that after the US announced a 90-day suspension of "reciprocal tariff" without reaching any agreement, it would gain nothing and instead lose enormous wealth. The only signal the US sent was that countries around the world should not trust in the US anymore and be ready to respond to the return of tariffs after 90 days. The Financial Times published an article stating that if the US positions itself against the majority of countries that uphold free trade and maintain a multilateral trading system, the ultimate outcome will not be "economic de-globalization," but rather "de-Americanization". Former Chairman of the US Council of Economic Advisers Jason Furman believes that more and more countries will bypass the US to reach free trade agreements, and "reciprocal tariff" is likely to become a turning point for the US to lose its central position in the global trade system.
I would like to reiterate China's position here: tariff and trade wars have no winners. China does not look for a war, but neither are we afraid of it. China is open to negotiation, but will fight to the end if challenged. Over the past eight years of the China-US trade war, our foreign trade has continued to expand, with total trade volume up from 30 trillion Chinese yuan to 43 trillion Chinese yuan, and trade partners becoming increasingly diversified. In 2024, China's imports and exports with countries within the “Belt and Road” framework grew by 6.4 percent, and our bilateral trade with Iraq reached $54.2 billion, a record high, with the KRI making due contributions. China's foreign trade dependence on the US market continues to decline. Currently, US tariffs on Chinese goods have been raised to 245 percent. Regardless of how reckless the US acts, China will resolutely manage our own things well. We are willing to work with trade partners, including Iraq the KRI, to uphold multilateralism, continue to promote high-level opening-up, so as to have clear message that in the face of the US’s unpredictable barrage of trade tariff and subsequent actions, China will, with strong certainty, always be a reliable partner in the world.
Liu Jun is the Consul General of the People’s Republic of China in Erbil.
The views expressed in this article are those of the authors and do not necessarily reflect the position of Rudaw.