‘The Current Trade War between the U.S and China
Table of Contents
I. The
backdrop of the US-led Trade War against China.......................3
II. Key Factors Leading to the Biggest Trade War.................................4
III.
Current Scenario - Economic and Political Perspectives...................6
IV. Impact of this Trade War on China and U.S.....................................
8
V. Impact on Other Countries.............................................................10
VI.
Future of the trade relations...........................................................10
Reference
Sources................................................................................12
The
backdrop of the US-led Trade War against China
Not every
war can occur on the battlefield or can lead to bloodshed. Some wars can even be
fought in the business arena. This has been the case of two of the largest
economies in the world, namely the U.S and China, who are bilaterally involved
in one of the epic trade-related wars. It all began after the Trump
administration took charge of the White House in 2016. Since then they have been
immensely instrumental in bringing in some hasty amendments of the U.S foreign trade
policies. They initiated by imposing high import duties on the Chinese goods coming
into the U.S. As a sequel, the Chinese government also retaliated similarly by
imposing high tariffs on some of the major imports from the US. But how and
what factors have led to such a trade rivalry between these two countries, in
which both of them have to take such adverse measures on each other.
Key Factors Leading to the Biggest
Trade War
There have
been a lot of debates about the factors responsible for the waging of such a trade
war. China has often been referred to as the global supplier of all kinds of
manufactured goods. So far, the U.S. and other countries in Europe have been
their major buyers. However, the Trump government found out that China, by dint
of their internal intelligence services and over a long period, has been
involved in a high level of espionage and theft of intellectual property (IP) and
artillery technologies from the U.S officials, different business individuals, academics
and investors. They also found out that the Chinese were involved in some
amount of unfair trade practices mostly in the form of forceful implementation
of policies against the U.S based patent holders in the Chinese commercial
spaces. Most foreign companies were being trapped into joint ventures with the
Chinese companies, which gave them an easy thoroughfare into the U.S. based technologies.
To recover from the huge dent as made on the U.S economy, due to the alleged
stealing of IP by China from the foreign companies, an equal measure of the
tariff has been made to sensitise the Chinese imports.
Numerous
Chinese investors were found to be buying more of American assets, rather than pumping
finances into the U.S market. According to the U.S officials, a high tariff
measure was merely taken to control the flow of the country’s finance into the
overseas market. The Chinese authority has often barred the foreign companies
to directly enter into their country’s some specific business zones, for
instance, the automotive sector, unless they form a joint venture with the
local Chinese companies. However, the clause, in pertinent to this joint
venture, has been the maximum ownership to be given to the domestic partner
only. This gives the right to the Chinese companies to utilise the foreign IP
and on that basis, they develop their home-grown products. This has also resulted
in a huge loss for U.S. investors when they tried to capitalise into the
Chinese market. Not only the U.S. companies but also the European investors had
the same experiences in China, as a result of which the European Commission has
registered a complaint to the World Trade Organisation (WTO) with the belief
that such policy needs to be stopped first, as it violates the WTO’s rule.
However,
the most important reason that came in favour of the US Government’s decision
of relevant tariff imposition in 2016 is that China had gained nearly 70% of
its total trade surplus mainly from the US market; on the contrary, the US had to
bite the bullet due to a huge trade deficit. The table below can clearly show
the differences in the import and export position of the two countries in 2016.
Table.1.
|
|
Export Value ($ Million)
|
Import Value ($ Million)
|
|
U.S.
|
1.45
|
2.25
|
|
China
|
2.10
|
1.59
|
Source: Wikipedia
The
disappointment towards China’s misguided trade policy dated back even during
the time of Barack Obama. China had mostly been indisposed in forming the
coherent trade amendments, as marked by many U.S officials, who were serving
the then Obama's administration. In the entire tenure of the Obama
administration, those officials have used the traditional method of dialogues to
influence the Chinese government. However, a 360-degree change was perceived
only when the Trump administration launched a combat mechanism on Beijing's
alleged unfair trade procedures. Almost every U.S politician has expressed
their opinion for strong trade measures to be taken against China. In this
trade war, the U.S has also been supported by the European nations and Japan,
who are willing to take joint action against the unfair trade policies of China.
Canada and Mexico have also recognised China to be misusing global trade
policies. It seems that China is now being looked upon as a global threat when
it comes to international trade.
Current Scenario - Economic and
Political Perspectives
Over the
last 30 months or so, the entire world has been witnessing a bitter trade
rivalry between the two largest nations. The U.S President Donald Trump has
never considered China to be a friend or a business partner of the U.S. The only
intention of China, according to him, is to make a big botch into the country’s
economy. Hence, Trump has used several anti-China statements during the time of
his electoral campaign in 2016. An over jingoism of the Trump administration
can be marked in their trade policy against China. So when he came to power and
till date, there have only been cases of more duress of imposing tariffs coming
from both the countries.
The Chinese
government, on the contrary, have always disagreed with the blames charged by
the U.S officials. They have also confirmed that all of their domestic R&D
facilities have facilitated the development of their domestic products and not
based on foreign technologies. Later on, a former U.S official has also stated
that the Chinese glory in technological advancement was not based on the
stealing of U.S intellectual properties, but simply due to the mega-investment
by the Chinese government.
So far, the
US has imposed tariffs on the Chinese goods worth of USD 250 billion and has
further threatened to implement tariffs on other USD 325 billion goods. China
too has laid down import taxes on the U.S. goods valued at USD 110 billion. If
necessary, they vowed to take on certain qualitative measures against the U.S.
that might jeopardise their businesses based in China. In 2018, the U.S
officials have listed out more than 1300 categories of Chinese goods that will
come under import tariffs. The Chinese Ministry of Commerce had too decided to
list out 128 American goods.
The US had
also been focusing on to levy on the imports of high-tech Chinese products,
which might disrupt the Chinese government's “Made in China 2025” - a programme
meant to remake China as the advanced manufacturing hub of the world. On the
other hand, China had purposely been targeting to impose tariffs on the large
agricultural imports like soybeans. Due to this imposition, the Chinese
government expects to disrupt the US economy and employment losses. This mighty
trade push-and-pull situation between the two countries is seemingly relentless
since both the presidents are not willing to give up each other’s demands.
The Chinese
negotiators are trying to fix up an optimal trade deal with their U.S
counterparts. To mitigate the current trade difficulties, the legislative body
of China has agreed to approve a new bill on behalf of the foreign investors
that strictly limits the Chinese companies from forcibly involving their
foreign partners to transfer IP and acquiring their trade secrets. Though, this
bill may come into effect from 2020. Simultaneously, the Chinese government has
also considered lifting the embargo on foreign investments in the automotive
sector from 2022.
The ground
reality is that the Chinese Government is left with only a few options from the
U.S. Government, which they are required to comply with to get some degree of
respite from the ongoing trade war. The U.S. Government is willing to end the
difficulties in trade between the two countries only when China agrees to end some
of its existing trade practices. Both the U.S and Chinese presidents have settled
for a treaty in the trade war at the Osaka based G20 Summit, where it was
decided that previously imposed tariffs will continue to exist, but no new
tariff will be endorsed.
Impact of this Trade War on China and
the U.S
The ongoing
trade war between the two nations has a far-reaching impact on the political
and economic environment of the two countries. It is very difficult to fathom
the degree of such an impact.
TO READ MORE, KINDLY CONTACT ME ON MY EMAIL -
Comments
Post a Comment