Pekino officials are increasingly concerned that President Trump’s invoices for Mexico may be the beginning of a broad campaign to force developing countries around the world to choose between trade with the United States or China.
Since Mr Trump imposed extensive invoices on goods from China during his first term, companies have been largely investing in countries such as Mexico, Vietnam and Thailand to gather Chinese ingredients in goods for mission to the United States. The final assembly in these countries offered a back door to the US market, regardless of the friction of trade between Washington and Beijing.
China’s trade surplus with the United States has shrunk almost one -third since 2018, but Chinese exports to developing countries have soared. China now sells 11 times more in Mexico, as China buys from it. These sales include Chinese car components assembled in Mexico in cars intended for representatives in the United States.
The concern now in Beijing is that Washington’s pressure could force Mexico to close its market in Chinese goods in return for a depreciation from US trade tariffs with Mexico. It is at stake for Mexico, among other things, are the jobs created by its abundant trade with the United States.
Mr Trump could then use Mexico as a model to ask other countries to take part in the trade war between the United States and China. This will further limit Chinese access to the huge US market, disrupting other routes to the United States.
Because Mr Trump reinstalled North America’s free trade agreement during his first term, very few businessmen or officials in China were expected to start his second term threatening to threatened to Mexico. Several unique characteristics of China’s trade and legal arrangements with Mexico mean that China’s indirect access to the US market is particularly at risk during the ongoing confrontation between Mr Trump and Mexico.
Particularly alarming for Chinese officials is a dark gap that was baked in the rules of the World Trade Organization when the Geneva -based organization was created in 1995.
Chinese officials referred to their nervousness to maintain access to developing markets during the weekly annual meeting of the Chinese legislator, which ended on Tuesday. Wang Wentao, the Minister of Commerce, noted at a press conference that a little more than half of China’s international trade was with countries belonging to the Belt and Road Initiative, China’s approach to less wealthy countries across Asia, Eastern Europe and Latin.
“We did not put all our eggs in a basket, which shows the strong durability of China’s external trade,” Mr Wang said, without saying that many of China’s exports to these countries eventually end up in the United States.
He made sure to point out that 34 % of China’s trade was with countries with which it has free trade agreements. This is important because these agreements, mainly with countries in Southeast Asia, commit the signatories not to suddenly increase invoices.
Mr Wang called for more such agreements with “countries and regions”.
Mexico is not one of the 27 countries that has signed free trade agreement with China, so the Mexican government can increase invoices for Chinese goods.
Mexico is also one of the several dozen developing countries that were members of the general agreement on invoices and trade, preceding the creation of the WTO these countries reached a special agreement at the establishment of the WTO, making very few binding commitments to reduce their invoices. Instead, they were encouraged to gradually reduce invoices voluntarily.
Mexico has reduced the average invoice to 7 %, according to the WTO, but the average “binded” Mexico invoice – which could start charging immediately by simply sending a WTO alert – is 36 %.
If Mexico was to increase its invoices in China, many other countries with the same WTO agreement could deal with US pressure not to be conducted for Chinese goods. Brazil, for example, applies invoices on average on average, but the bound invoice is 31 %.
The WTO rules prevent countries from increasing invoices against a single country. While Mr Trump ignored the rules, most other countries, including Mexico, China and members of the European Union, are trying to avoid doing so, except for another country to launch a trade war.
However, the WTO allows countries to increase tariffs on their upper ceilings, provided that the increase applies to all imports of targeted product from around the world. China exports almost all worldwide offer to many categories of processed goods. This allows developing countries to increase their applicable invoices in these categories and to hit almost exclusively goods from China.
China’s hope is that other major commercial nations will refuse to choose between China and the United States.
“I do not think that these close commercial partners with China will choose one side, especially those with free trading agreements with China, even if they have high binding invoices to the WTO,” said Tu Xinquan, a dean of the Chinese Institute for Economics and Economics. Mao founded the University in 1951 to train and advise China’s trade negotiators.
Unlike leaders in Canada or the European Union, President Claudia Sheinbaum in Mexico said little publicly during the recent trade dispute, even when its government is largely focused on the issue. Mexico’s ambassador to China, Jesús Seade, helped create the WTO in the early 1990s and played a central role in the renegotiation of NAFTA’s Mexican with President Trump in 2018.
China is lucky that Vietnam, its largest partner for indirect exports to the United States, is negotiating with different rules from Mexico because it did not participate in the WTO until 2007.
Vietnam applies an average invoice of 9 percent and the average that could be applied is just 12 percent. Industrial countries, such as Canada, also have low -bound invoices that limit their ability to charge more for goods from China.
China’s economy depends largely on a large and ever -ever -intellectual trade surplus, which reached almost $ 1 trillion last year. Almost all China exports are made of products and the surplus to these goods was equivalent to about one tenth of the entire economy of last year.
This is a level that the United States did not achieve even after World War II, when the US industry quickly returned to political production and increased exports, as the rest of the world was in ruins.
China depends on the increase in exports, because a housing market has left Chinese households reluctant to spend, limiting the economy’s ability to grow in other ways.
Another vulnerability is that much of China’s trade surplus is with developing countries. These countries, in turn, are based on the operation of their own trade surpluses with the United States to pay for the goods they import from China, drawing on Mr Trump’s anger.
