Rational, practical thinking needed in China-US trade disputes

A trade confrontation between China and the United States is a 'lose-lose' situation, where it will not only hurt China's economy and those countries along the production chain, but also will hurt the US in various ways, such as increasing consumer prices, Jing Ulrich, vice-chairman for Asia Pacific at JP Morgan Chase, told China Daily.

While the macroeconomic impact of the upcoming tariffs will be limited, it would impact global supply chains.

"Based on the trade in value-added (TiVA) statistics, one-third of the 'Made in China' goods are created in other countries, and the share of foreign value-added in China's exports to the US is even higher in the electrical and optical equipment commodity group, which accounts for the largest share in China's exports to the US," Ulrich told China Daily in a written response regarding the effects of a China-US trade conflict.

"In this area, Japan is the top supplier (10 cents to every dollar), followed by South Korea, Taiwan, Europe, and the US, while China only makes 46 cents within its own borders. Because of this, tariffs placed on China's machinery and electronics will damage supply chains across Asia and America," Ulrich reiterated.

The US government last week upped the ante in the trade battle with China, suggesting further tariffs on $100 billion of imported goods from China, on top of the 1,300 imported products worth $50 billion announced earlier, whereas a punitive 25 percent tariff will be levied.

This comes less than 24 hours from when China said it planned to levy 25 percent tariffs on 106 US products, representing $50 billion, including aircraft, soybeans and autos.

Ulrich said if China-US trade tensions intensify, it will be bad for global financial markets, and negatively impact daily operations for small businesses and corporations.

Though the path to trade negotiation will be bumpy, Ulrich expects both countries to eventually sit down and figure out how to solve their issues.

"This will take time. It would not be easy, but it is the only way forward that is practical. In the long-run, rational thinking will occur, in which then we will see the two sides begin to solve their problems. It will all work out in time," Ulrich said.