Casualties of the trade war

Casualties of the trade war

US President Donald Trump and China's President Xi Jinping shake hands after making joint statements at the Great Hall of the People in Beijing, China, Nov 9, 2017. (Reuters file photo)
US President Donald Trump and China's President Xi Jinping shake hands after making joint statements at the Great Hall of the People in Beijing, China, Nov 9, 2017. (Reuters file photo)

It seems the US-China trade war is going to affect more people in the two countries than first thought, in addition to the potentially devastating implications for the global economy.

The reason is that Chinese anger with the United States over tariffs on more Chinese goods is being expressed in some unexpected ways.

Local media reports say some Chinese hotels and restaurants are raising prices for American customers in an unofficial form of retaliation. The Global Times, the hawkish tabloid published by the People's Daily, says a hotel in Shenzhen has slapped a surcharge of 25% on American guests.

"The US provoked a trade war, we vow to accompany it to the end!" a notice from the Modern Classic Hotel Group declared. That hardly sounds welcoming, even to guests who are not holding American passports.

Front office manager Bai Lulu denied the report, saying all guests are treated equally. "We wouldn't charge one type of guest more than another. We have no idea where this news came from," she told Reuters.

However, a hotel employee who declined to be identified insisted the report was true, pointing to notices in the restaurant stating that Americans would be charged 25% extra. A spokesperson for the hotel said its manager was "really angry about the endless tariffs the US planned to impose on China".

Meanwhile, a picture circulating on social media shows a notice purportedly posted in a restaurant named Xianglixiangqin that serves Hunan cuisine: "US customers must pay 25% more when eating in the restaurant."

Many Chinese netizens have cheered such moves, including a blogger called "Cishisushi" who has 27.4 million followers on Weibo: "From now on, if you want to treat US nationals to eat in our restaurant, you have to pay 25% more. Please consult the US Embassy if you have any inconvenience."

"Well done! We should charge [extra] for US passengers' plane tickets as well," commented a Weibo user named "yijianfang". Another called on Chinese not to travel to the US anymore.

Things have certainly escalated since early this year when the two countries fired their initial tariff salvos. At the time, analysts saw little impact given the low direct exposure to affected sectors and companies. Also, both Washington and Beijing were still talking in hopes of reaching a deal that would narrow the $350-billion US trade deficit with China.

But tensions mounted on July 6 when each side imposed 25% tariffs on $34 billion worth of the other's goods. Washington has since threatened tariffs on an additional $200 billion in Chinese goods, which could take effect in September.

Further financial and economic fallout is possible. Fitch Ratings sees increased credit risk and even the prospect of ratings downgrades for corporate debt issuers if their businesses take a hit from tit-for-tat tariffs.

"A prolonged trade dispute resulting in weaker GDP growth, higher inflation, increased currency volatility or rapid changes in commodity prices could have wider rating implications," it said.

A quarterly survey by the Japan Center for Economic Research and Nikkei Asian Review found Asian economists growing more nervous.

"A trade war between the US and China will impact the supply chains of goods that are tariffed in both the US and China," Manokaran Mottain of Alliance Bank in Malaysia warned in the survey conducted in June in five Asean countries -- Indonesia, Malaysia, the Philippines, Singapore and Thailand -- plus India.

The Asian Development Bank also warned last week that the rise in protectionism from the US and countermeasures from China and others "could undermine consumer and business confidence and thus developing Asia's growth prospects".

As public sentiment towards the US turns bitter, the Chinese government is trying to keep things from getting worse. It is ordering Chinese media to refrain from personal attacks on Donald Trump and limiting open commentary.

But I'm not sure if Beijing's typically top-down approach will curb public anger with Washington, especially now that Mr Trump is stepping up attempts to make China change its intellectual property practices and high-technology industrial subsidy plans.

Charging American visitors more won't do any good for the hospitality industry in China or settle Sino-US disputes. This kind of behaviour should be avoided, rather than promoted.

And my message to Washington is that provoking trade disputes, partly through incendiary comments from the man in the White House, can only backfire. If the global economy starts to stumble, American people will certainly bear the brunt of the impact sooner or later.

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