Civil servants in Beijing are increasingly concerned that President Trump's rates on Mexico can be the start of a broad campaign to force developing countries around the world to choose between trade with the United States or with China.
Since Mr Trump has imposed extensive rates from China during his first term, companies have been investing heavily in countries such as Mexico, Vietnam and Thailand to collect Chinese components in goods for shipment to the United States. Taking the final meeting in these countries offered a back door to the American market, regardless of the trade rush between Washington and Beijing.
The trade surplus of China with the United States has shrunk almost a third since 2018. But Chinese exports to developing countries have been shot up. China now sells 11 times as much to Mexico as China buys out. They include Chinese car parts composed in Mexico in cars intended for dealers in the United States.
The concern in Beijing is that the pressure of Washington Mexico could force his market to close his market in exchange for a postponement of the American rates on the trade with Mexico. At stake for Mexico are the jobs created by the abundant trade with the United States.
Mr. Trump could then use Mexico as a model to demand that other countries in the trade war between the United States and China. That would further limit Chinese access to the enormous American market by disturbing other routes to the United States.
Because Mr Trump again negotiated the North -American free trade agreement during his first term, very few business people or officials in China expected that he would start his second term by threatening steep rates in Mexico. Various unique characteristics of trade and legal regulations that China has with Mexico mean that indirect access from China to the American market is in particular the risk during the continuous confrontation between Mr Trump and Mexico.
Especially worrying for Chinese officials is an obscure Maas in the law on the rules of the World Trade Organization when the organization established in Geneva was founded in 1995. The Maas in the law allows Mexico and potentially dozens of low income and middle-income countries-to increase legal rate and suddenly add to Chinese goods, while Beijing would have the right to condemn itself.
Chinese officials referred to their nervousness on maintaining access to development markets during the annual annual session of the Chinese legislative power of a week, which ended on Tuesday. Wentao, the Minister of Trade, noted at a press conference that was just over half of the Chinese international trade with countries belonging to the Belt and Road Initiative, the outreach of China to less prosperous countries, Eastern Europe, Arabic and Latin -America.
“We have not placed all our eggs in one basket, which shows the strong resilience of Chinese foreign trade,” Mr. Wang said, without mentioning that much of Chinese exports to these countries ended up in the United States.
He ensured that 34 percent of Chinese trade was with countries with which it has free trade agreements. This is important because these similarities, mainly with countries in Southeast Asia, bind signatories in order not to suddenly increase the rates.
Mr. Wang called for more such similarities with 'willing countries and regions'.
Mexico is not one of the 27 countries that has signed a free trade agreement with China, so that the Mexican government can increase rates about Chinese goods.
Mexico is also one of the many dozens of developing countries that were members of the general agreement on rates and trade, which preceded the creation of the WTO that reached these countries a special deal in the establishment of the WTO, which made very few binding obligations to lower their rates. Instead, they were encouraged to gradually reduce voluntarily.
Mexico has reduced its average rate to 7 percent, according to the WTO, but the average “bound” rate of Mexico – that it could start immediately by sending a report to the WTO – is 36 percent.
If Mexico would increase his rates on China, many other countries with the same WTO deal could experience the American pressure not to become pipes for Chinese goods. Brazil, for example, applies an average of 11 percent on average, but the bound rate is 31 percent.
WTO arranges Bar -countries to increase rates against a single country. Although Mr Trump has ignored the rules, most other countries, including Mexico, China and the members of the European Union, try to avoid this, except when another country starts a trade war.
But the WTO supports countries to raise rates to their highest bound ceilings, provided that the increase applies to all the import of the intended product from all over the world. China exports almost all the supply of the world in many categories of goods. This makes it possible for developing countries to increase their applied rates in these categories and to touch goods from China almost exclusively.
The hope of China is that other large trading countries will refuse to choose between China and the United States.
“I don't think those narrow trading partners with China will choose a side, especially those with free trade agreements with China, even if they have high binding rates at the WTO,” said TU Xinquan, the dean of the China Institute for WTO studies at the University of International Business and Economics in Beijing. Mao founded the university in 1951 to train and advise China trade negotiators.
In contrast to leaders in Canada or the European Union, President Claudia Sheinbaum of Mexico did not say much publicly publicly during the recent trade conflict, even if her government is strongly focused on the issue. The ambassador of Mexico in China, Jesús Seader, helped to create the WTO in the early 1990s and played a central role in the re -negotiation of Nafta in Mexico with President Trump in 2018.
China is lucky that Vietnam, the largest partner for indirect exports to the United States, acts under different rules than Mexico because it only came to the WTO in 2007. The trade organization needs developing countries that have joined after 1995 to accept lower ceilings at their tied rates.
Vietnam applies an average rate of 9 percent, and the average -bound rate that it could apply goes to only 12 percent. Chanryized countries, such as Canada, also have low -bound rates that limit their assets to charge more on goods from China.
The Chinese economy is highly dependent on a large and ever -increasing trade surplus, which reached nearly $ 1 trillion last year. Almost all China exports are produced goods, and the surplus in these goods was about a tenth of his entire economy last year.
That is a level that the United States did not reach, even after the Second World War, when American industry quickly returned to civil production and released exports, because many of the rest of the world were in ruins.
China depends on the rising export because a housing market crash has cautious to spend Chinese households, which limits the ability of the economy to grow in other ways.
Another vulnerability is that much of the trade surplus of China is among developing countries. These countries in turn rely on running their own trade surpluses with the United States to pay for the goods they import from China, drawing Mr Trump's anger.
