U.S. Protectionism Harms Global Stakeholders

The wayward U.S. tariff proposals are typical unilateralist and protectionist practices that are hurting global companies and putting free trade at risk.

Global companies, which have long been the beneficiaries from close economic ties between China and the United States, are set to lose from escalating trade disputes.

Almost 60 percent of the China's trade surplus with the United States is a result of trade activities by foreign-funded enterprises, including many U.S. companies.

A recent report by the American Chamber of Commerce in South China said that U.S. firms rely much on Chinese imports to generate profits.

A substantial share of Chinese imports is sourced by U.S. companies, many of which source much, most, or in some cases nearly all of the goods they sell from China, not just for the U.S. market, but for global markets, according to the report.

Many U.S. firms that have operations in China have already expressed their worries over escalated trade tensions.

"The world is interdependent and the cost of trade wars is too high, with a negative impact to the global economy," commodity trader Cargill Inc. said.

In addition to potential losses to U.S. firms, the negative effects would spill over to multinationals based in other countries.

"A tariff war between the U.S. and China could not only cut down on trade between the two nations but can affect countries like Japan, which for example exports parts to China to be assembled and sent to the U.S.," the Japan Times quoted Kenji Yumoto, vice chairman of the Japan Research Institute, as saying.

Global financial markets were also hit hard in fear of intensified trade tensions. The U.S. stocks plunged on Friday, with all three major indices tumbling over 2 percent, after the U.S. side threatened additional duties on Chinese goods worth 100 billion U.S. dollars Thursday.

Uneasy sentiment also brought almost all major global indices lower, with the FTSE 100 index, the 225-issue Nikkei Stock Average, and the DAX index all losing ground the previous trading day.

"A trade war would be in no one's interests," said a Standard Chartered report, adding that a trade war could affect 20 percent of the global economy.

In the long term, the U.S. tariff proposals, which contravene the World Trade Organization (WTO) rules, undermine the trade system that has evolved in the last three quarters of a century.

While advocating a market environment for fair competition, the WTO paid a lot of attention to "relative equality" by taking into consideration the development difference of developing and developed countries when trade rules were formulated.

China and the United States are the biggest developing and biggest developed countries in the world, respectively. Bilateral economic and trade relationship is an inevitable result of international industrial division and distribution of resources under the backdrop of globalization.

The development of China-U.S. economic and trade relations should continue to follow the historical logic and abide by the well acknowledged WTO rules, instead of breaking them.

Otherwise, by disrupting the rules, it could have a long lasting impact on the global supply chain.