Trump’s tariff strategy meets its moment of truth in talks with Xi - Politico

The Effectiveness of Tariffs as a Negotiating Tool: A Case Study on China

In recent years, tariffs have become a popular tool used by governments to negotiate trade agreements and impose penalties on other countries. The use of tariffs is often seen as an effective way to gain leverage in trade negotiations, particularly when used in conjunction with other economic tools such as taxes and subsidies. However, the effectiveness of tariffs as a negotiating tool can vary depending on the country being targeted.

The Case of China

In 2018, the Trump administration imposed a series of tariffs on Chinese goods in response to what it claimed were unfair trade practices by Beijing. The tariffs were aimed at forcing China to change its behavior and open up its markets to American companies. However, despite the imposition of these tariffs, China has responded with significant resistance.

China's Response

China has taken several steps to counter the effects of the tariffs imposed by the US. These include:

• Diversifying trade relationships: China has sought to reduce its dependence on the US by diversifying its trade relationships with other countries. This includes increasing trade with countries such as Japan, South Korea, and Southeast Asian nations.
• Investing in domestic industries: China has invested heavily in its domestic industries, including manufacturing and technology, in an effort to reduce its reliance on imports from the US.
• Implementing retaliatory tariffs: China has implemented its own set of tariffs on US goods, which have been met with resistance from American farmers and manufacturers.

The Impact on Trade Agreements

Despite the imposition of tariffs by the US, China has continued to pursue trade agreements with other countries. However, Beijing's response to these agreements has been significant, indicating that tariffs may not be an effective tool in negotiating trade agreements.

• Trade agreements with Japan: In 2019, China and Japan signed a comprehensive economic partnership agreement (CEPA). The agreement aimed to increase trade and investment between the two countries.
• Trade agreements with Southeast Asia: China has also pursued trade agreements with several Southeast Asian nations, including Indonesia and Vietnam. These agreements aim to promote economic cooperation and integration in the region.

The Effectiveness of Tariffs

In conclusion, the effectiveness of tariffs as a negotiating tool is not universal. While tariffs have been used effectively in some cases, such as in negotiations with countries like Canada and Mexico, they have not worked as intended against China. The response from Beijing has been significant, indicating that other economic tools may need to be employed.

Alternatives to Tariffs

Given the limitations of tariffs as a negotiating tool, other options should be considered when pursuing trade agreements or negotiating with countries. These include:

• Economic incentives: Offering economic incentives, such as tax breaks or subsidies, can help encourage cooperation and compromise.
• Diplomatic engagement: Engaging in diplomatic efforts can help build trust and cooperation between nations.
• Investment promotion: Promoting investment and trade can help increase economic ties and reduce tensions.

In the end, the effectiveness of tariffs will depend on the specific context and goals of each negotiation.