“If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system, and that’s quite meaningful.”
In other words, the administration wants to sanction one of the US’s biggest trading partners, and the world’s second-largest economy.
China is the world’s third-largest recipient of Americans exports, behind only Canada and Mexico. China is the world’s largest source of imports for Americans, slightly ahead of both Mexico and Canada.
In 2016, Americans exported $169 billion in goods and services to China while importing $478 billion of goods and services. Every year, both consumers and producers benefit from the importation of Chinese electronics, machinery, food, footwear, and more.
Ratcheting up economic warfare with China could serve to cut off these avenues of trade and thus will only cost consumers and small business owners who currently benefit from lower-cost machinery, clothing, and more.
For the mercantilists in the Trump administration, of course, American consumers import “too much” from China anyway, and Americans and ought to be prohibited by the US government from purchasing what they want. The North Korea situation could serve as a convenient excuse for slapping prohibitions on American consumers in the name of “fair trade” while also serving as a foreign policy tool.
The last thing the US consumer needs is a trade war with China.
At this point, however, the US isn’t talking about cutting off trade in such a blunt manner.
As Mnuchin notes, the strategy here is to “prevent [the Chinese] from accessing the U.S. and international dollar system.” In practice, this would likely mean restricting access to the so-called SWIFT system which facilitates international transactions in dollars.
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