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Commentary

Environmental Consequences of the Trade War

By Hannah Caspar-Johnson

August 15, 2018

Source: UnSplash

Articles and Analysis

Getting Ready for China
Jim Talent
National Review, August 13

“The Chinese armed forces will surpass ours unless we allocate more funds for modernization.”

Trump did not solve the North Korea problem in Singapore—in fact, the threat has only grown
Ryan Hass
NBC News, August 12

“President Donald Trump took a gamble meeting face-to-face with North Korean leader Kim Jong Un in Singapore in June. In justifying his decision, Trump argued that past attempts to dispatch experts to negotiate nuclear disarmament agreements with North Korea had failed, but that he would achieve better results by meeting directly with the decision-maker. Mounting evidence suggests that despite his self-professed dealmaking skills, Trump did not leave the historic summit with the decision he sought.”

“The problem has not been solved and in fact the threat has only grown since Singapore. In the intervening weeks, North Korea reportedly has been upgrading nuclear and missile facilities, increasing production of fuel for nuclear bombs at secret sites, building new long-range missiles, and exploring ways to hide the extent of its nuclear weapons program from the United States. While these reported activities do not violate the vague text of the Singapore summit joint statement, they shatter its spirit. Perhaps more importantly, they call into question the underlying assumption of Trump’s engagement with Kim Jong Un in the first place — that North Korea wants to exchange its nuclear and missile programs for a more prosperous future for its people.”

New investment rules will squeeze US-China flows
Rana Foroohar
Financial Times, August 12

China-U.S. Trade Spat Is Just a Start to the Economic Cold War
Conor Sen
Bloomberg Opinion, August 12

“China is not just another front in President Donald Trump’s war on trade. Unlike Mexico, Canada, Europe and other targets of the president, China will be a source of economic conflict for years to come, long after the tariff level on soybeans has been settled. Like the rivalry with the Soviet Union, economic competition with China may form a cold war that shapes American politics and economic policy for a generation or more.”

China Doesn’t Want to Play by the World’s Rules
Abigail Grace
Foreign Policy, August 8

“U.S. President Donald Trump’s most recent threat to target all $505 billion in annual Chinese imports to the United States is only the latest development in the looming U.S.-China trade war. While Trump and his team are preparing for an economic competition focused largely on tariffs, policymakers must prepare for a multi-domain competition rooted in Chinese political posturing, domestic propaganda, and economic coercion targeting American firms operating in China. These unconventional challenges will demand a comprehensive U.S. response.”

China Is Cheating at a Rigged Game
Jake Werner
Foreign Policy, August 8

“A new attitude toward China is rapidly taking shape across the U.S. political spectrum…While there are significant differences of policy and strategy, seemingly everyone agrees that the Chinese are conducting trade in a predatory manner that hurts American business and workers, and that the time for confrontation has arrived.”

Past Events

An American strategy for Southeast Asia
Event hosted by American Enterprise Institute, August 7

“On Tuesday, AEI’s Michael Mazza hosted an event celebrating the release of his report, “An American Strategy for Southeast Asia.” Assistant Secretary of Defense for Asian and Pacific Security Affairs Randall Schriver delivered a keynote address, followed by a panel discussion led by AEI’s Dan Blumenthal.”

“In the wake of the “trade war” with China and drama on the Korean Peninsula, Southeast Asia often escapes notice. But this vital corner of the world cannot become a sideshow. Certainly, Southeast Asia’s tremendous economic and strategic potential is not lost on China, which has tried to bring the region under its influence. And Chinese aggression is only the start; terrorism and democratic backsliding also threaten the region. The need for strong partnerships in Southeast Asia has never been greater.”

View the webcast here

The Definitive DC China Happy Hour
Event hosted by Young China Watchers, August 8

20+ DC-area China-related student, alumni, social and professional organizations got together for the fifth annual Definitive DC China Happy Hour. Young China Watchers hosted Scott Tong, a reporter and former China bureau chief for NPR’s Marketplace, to speak at the event about his recently published book.

Upcoming Events

Reimagining U.S.-South Korea Alliance
Event hosted by Brookings Institution, August 22

The New Southbound Policy and U.S.-Taiwan Relations
Event hosted by American Mandarin Society, August 23

Book Launch: Memory, Identity, and Commemorations of World War II – Anniversary Politics in Asia Pacific
Event hosted by Elliott School of International Affairs, August 31

Commentary

Environmental Consequences of the Trade War

By Hannah Caspar-Johnson

The US-China trade war has been a major topic of discussion this summer. The tit-for-tat sanctions and back-and-forth threats are already beginning to produce unforeseen side effects that will inevitably spread far beyond economics and trade policy. One such arena is the battlefield in the fight against global climate change.

The economic policies of the trade war threaten the very economic buffers that provide nations with resilience needed to adapt to an unpredictable environment: free and flexible international trade. Under policies of free trade, processes of imports and exports allow the market to adjust to shocks such as extreme weather and natural disasters by replacing lost supply from the affected country with production from an unaffected country.

A recent study found that President Trump’s conservative trade policies would cause the cost of climate changed-caused flooding to skyrocket by nearly 500 percent over the next two decades. Initial flood related losses vary greatly from region to region. In the next 20 years, the United States will suffer an estimated $30 billion worth of direct damages, while China will face $389 billion (an increase of 82 percent from the previous 20 years). A major reason for this discrepancy is that flooding in China affects its Eastern and Southern regions, where many crucial ports and factories are located (not to mention huge population epicenters). However, these direct losses are only the beginning of the problem.

Although China would bear the brunt of the direct economic damages, the United States would face far higher indirect losses, reaching $140 billion in the next twenty years. The $140 billion indirect losses need not be so great, the report author argues, and the key lies in the balance of the trade relationship. Whereas China and the European Union have made strides to strengthen trade ties, and will thus better weather the coming storm, the United States is increasingly turning towards economic isolationism, removing the exact mechanisms that could help relieve climate-related economic costs.

A more open, balanced trade network, such as that seen between China and the EU, allows markets to adjust to environmental shocks by transferring production and demand. If one region, say Shenzhen, a coastal city that houses much of the world’s electronics production, is hit by strong storms and ensuing floods one summer, balanced trade relations allow the markets to absorb or dampen economic shocks by shifting demand to a different supplier, possibly one thousands of miles away in Europe. The opposite is also true: if a European factory gets damaged, its supply drop can be picked up by producers in China.

By reducing international trade, however, President Trump destroys these safety nets: “While the president is right to worry about the trade balance, he is terribly wrong to seek reducing trade with other countries. On the contrary, increasing international trade would help climate-proof the U.S. economy.”

In addition to increasing the financial burden associated with climate change, Trump’s trade war has dealt a significant blow to the efforts to combat climate change in the first place.   In January of this year, President Trump placed 30% tariffs on Chinese solar panels, effectively disincentivizing American consumers from purchasing them. . Solar energy is one of the most efficient options on the market to reduce our reliance on fossil fuels, a major contributor to climate change. Furthermore, Trump’s tariffs prompted Beijing to cut subsidies for solar installation, creating a steep drop in the ability of solar power to provide clean energy to China’s huge energy consumption market.

Another unintended effect of the tradewar stems from the Chinese-instituted tariff on American soybeans. Soybeans have the unique ability to to absorb nitrate pollutants from the soil, pollutants that would otherwise end up in Americans’ drinking water. As China represents the largest market for American soybeans, this tariff will prompt a steep decline in soybean production and a corresponding increase increase in the nitrate levels in American drinking water.

There are other ways in which the trade war—and the deteriorating US-China relationship—can do serious damage to environmental protection efforts. Trade wars erode the channels of negotiation needed for cooperation in all diplomatic realms, leading to inefficient use of global resources, and limiting the benefits from the international sharing of technology. As Erik Solheim, executive director of the United Nations Environment Programme recently pointed out, “It will make the entire system for environment, for peace and for development, every issue, much more difficult if we were to see a major trade war.”

Contrary to what the American president thinks, trade wars are not good, nor are they easy to win. The domestic economic impact alone is is devastating, but the consequences go far beyond that. Economic policies need to be considered within a broader context. Tariffs do not fit into a strategy of adaptation and, in fact, threaten the possibilities of global adaptation. Climate change is a universal hazard, and in order to best combat it, we should be working to strengthen international cooperation and economic ties, rather than weakening them.

 

Hannah Caspar-Johnson is a research assistant at the Institute for China-America Studies.