The trade war between China and the US

Hey guys, So today I’ll be talking about the ongoing trade war between China and U.S. I hope you like this post, don’t forget to like, comment and share.

As far as I could find, the trade dispute and war of words between the United States and China started way earlier than this year. Here is a series of events that led up to where we are right now.
Let us flashback and see what happened in the past. In September 2011, Trump tweeted “China is neither an ally or a friend — they want to beat us and own our country.”, This tweet was one of the comments he made about China’s trade practices. This was before he ran for Presidency. This resurfaced again in 2016, but it finally got stronger this year. Then in May 2016, Trump made the following comment: “We can’t continue to allow China to rape our country and that’s what they’re doing. It’s the greatest theft in the history of the world.” This was when he was campaigning for the Republican Party’s presidential nomination; This was one the several statements he made about China’s trade practices during his campaigning. Then in April 2017, the USTR (United States Trade Representative) got authorised to check if Aluminum/steel imports pose a threat to the national security. Later in April 2017, Chinese President Xi visited Trump in his Mar-a-Lago estate in Florida, where they decided to set up a 100-day action plan to settle the trade differences.
Later on May 22 2017, China and US agreed on a trade deal, which would give US firms greater access to China’s agriculture, energy, and financial markets, while China would gain access to sell cooked poultry to the US. In August, the USTR started an investigation into certain acts, policies and practices of the Chinese government relating to technology transfer, intellectual property and innovation. In November of 2017, Trump paid a state visit to China, which is said to have made the relations better. Later in February 2018, The US put up ‘Global safeguard Tariffs’, placing a 30% tariff on all solar panel imports, except the ones imported from Canada, (worth US$8.5 billion) and a 20% tariff on washing machine imports, which were worth US$1.8billion.
In March 2018, Trump signed a memorandum, which directed the following acts:
To file a WTO case against China for their discriminatory licensing practices;
To restrict investment in key technology sectors; and
To impose tariffs on Chinese products (such as aerospace, information communication technology and machinery).
The US also imposed a 25% Tariff on all steel imports, except Argentina, Australia, Brazil and S.Korea, they also imposed a 10% tariff on all aluminium imports, except Argentina and Australia.
To Counter on US steel and Aluminium tariffs, In April 2018 China imposed taxes (Ranging 15-25 %) on 128 products, worth US$3 billion. The products included fruit, wine, seamless steel pipes, pork and recycled aluminium.
Later on April 3rd 2018, the USTR released a list of 1,334 proposed products, subject to a potential 25% tariff. (List was revised on June 15) All of the products worth US$50 billion. Reacting to the USTR’s list, China proposed 25% tariffs be applied on 106 products also worth US$50 billion, including goods such as Soybeans, automobile and chemicals, (list revised on June 16) This kept going on back and forth. Then on April 16, The US Department of Commerce decided that Chinese telecom company ZTE transgressed US sanctions. Also banning US companies, from doing business with ZTE for seven years. Then anti-dumping duties of 178.6% on Sorghum from the US, were declared by China. Then the rest of April went by, then US-China had trade talks in Beijing, where the US requested that China diminish the Trade gap by US$200 billion in two years. Talks finished with no resolution. In May 2018, Trump tweeted about Promising to help ZTE. Then Later in May, China’s Commerce ministry declared that they would stop the tariffs on US Sorghum at discussions. When reportedly China was said to have agreed to buy more US Goods, US and China decide to put the trade war on hold. This truce lasted a short time because on May 29 US reinstated the Tariff plans. There were more trade talks in June between the two countries. Later US and ZTE agreed to let ZTE continue its business. In June both countries reviewed and finalised their tariff lists, which were set to take effect on July 6. The US decreased their 1,334 items to 818 items with 25% tariff. There was a second list by the USTR consisting of 284 new items which were still under consideration. China increased their proposed 106 products to 545 products, with a 25% tariff. To counter against USTR’s 2nd list, China proposed a second round of 25% tariffs on an additional 114 items. Both Country specific tariffs took effect on July 6th. In July the USTR discharged a third list of taxes of more than 6,000 products originating in China (worth US$200 billion), which will be liable to a 10% tax. In August, on Trump’s decision, the USTR considered a 25% tax on List 3 rather than 10%. This Included goods from the following categories: consumer products, chemical and construction materials, textiles, tools, food and agricultural products, commercial electronic equipment and vehicle/automotive parts. To retaliate against US’s potential third round of tariffs, in August China announced a second round of taxes on 5,207 products originating from the US, worth around US$60 billion; this included the following:
– 25 % on 2,493 products (agricultural, products, foods, textiles and – products, chemicals, metal products, machinery);
– 20 %on 1,078 products (foods, paperboard, chemicals works of art);
– 10% on 974 products (agricultural products, chemicals, glassware); and
– 5 % on 662 products (chemicals, machinery, medical equipment).
In August both countries also finalised and released the second round of Tariffs. The 10% tariff on list two was increased to 25%. Five of the 284 things in the first list distributed on June 15 were removed, these being: alginic acid, part machines, compartments, coasting docks, and microtomes (by and large worth US$400 million in 2017). While China announced a corresponding 25 % extra duty on US$16 billion of US fares to China. Both lists were to put to effect on August 23 2018. Also in August, the Chinese Ministry of Commerce declared that a formal case had been held up at the WTO against the US for its taxes on solar panels, claiming that US taxes have harmed China’s trade interests. US and Chinese mid-level agents also met in Washington to examine approaches to determine the developing exchange struggle and heightening levies. The talks ended with no real leaps forward. China additionally recorded another WTO grievance against the United States’ Section 301 duties on Chinese products issued on August 23 under List 2 (25% taxes on US$16 billion). In September a lot of things happened, Trump threatened new tariffs. The US also invited China to re-open the negotiations. In September, the US also finalised list 3 of the tariffs, worth US$200 billion on Chinese goods. The US says that the taxes will go live on September 24 at an underlying rate of 10%, to be extended to 25% by January 1, 2019. China also announced that they would put tariffs on US goods worth US$60 billion. China cancelled trade talks planned with the US, before the tariffs on US$200 billion worth of Chinese goods, was put into place. On September 24, both countries put their third rounds of tariffs into effect. The US implemented tariffs on US$200 billion while China implemented tariffs on US$60 billion. During this China also released a White paper, which laid out the government’s official position in the Trade relationship between both countries. Two days after these tariffs were put into place, Trump accused China of meddling in the upcoming US elections. But the only evidence he brought in were advertisements (designed to look like articles) that China bought in some US newspapers. In the end, the Total US tariffs applied exclusively to China were US$250 billion, and the total Chinese tariffs solely applied to the US were US$110 billion.

This whole timeline is to connect different pieces of puzzles and to understand the trade war background, it not only shows how the disputes started but also how they may turn out, even though what is going on right now is a bit confusing at it is unsure what both countries want out of this. For me, I think that this timeline helps us know when one of the countries feel threatened by the other country, and most often they retaliate by doing the same thing the first country did. This timeline also assists us in knowing which country has the upper hand at certain times and when that same country can’t do anything.

Looking at how this trade war will impact not only China and the US but also the majority of Asia. Since we know that both the countries are large economies and if China’s economy falls there is going to be a significant impact on the less developed countries in Asia.
Both countries are being affected by this in small and significant ways. A lot of goods and products that people buy will have a rise in their prices which will most likely affect the consumers. There will also be impacts to business that use the raw materials imported from the other country. The companies being affected can also result in them shutting down and unemployment. This may cast the negative impact on the economy of the country since it may drop as there will be more unsuccessful businesses and disappointed citizens who are going to either be unemployed or are not going to be able to afford supplies. According to different experts of economics, if the tariffs by the US to China keep going, China’s economic growth will decrease. But these countries are not the only ones being affected. A lot of Asia is being impacted by this war and may also be affected in the future even though it’s unsure if the results are going to be positive or negative. This trade war also inherits some opportunities for other players in Asia, such as when China stops having agriculture imports from the US ; it will look for other potential partners to deal as a substitute for the US, which will most likely be in Asia; however it depends on the political positioning and alignment of those countries who are willing to deal with China. While the US will try to export the same agricultural products to someone else which could be in Latin America or Asia. This trade war could be beneficial to some Asian countries, but it could have a devastating effect on other countries.

Although it is unsure where this leads, we are sure about one thing; this could either result in a better deal between the US and China, or this could ruin what remains of the relationship and have an actual and decisive trade war among them. A war between these two countries was long expected, but it was not expected in the form of a trade war, which is why there is a lot of confusion going around as to what is going to happen next. There have been talks between both countries, but all of them seem to end without any resolution.

One lesson learnt for the US is that most of their trades depended solely on China, and now because of these unpredicted taxes, quite a few businesses are going into loss. The best thing they could have done was to have had better relationships with other countries if this had been, the US would have been in a better place. It looks that the US failed to create alternatives sources of trade, and took rigid position not only against China but agiant its allies in Europe.
China will be in a better place for the agricultural products as there are a lot of Asian countries willing to make deals with China, in fact, India has already signed contracts to ship 500,000 bales (85,000 tonnes) of its new season cotton harvest to China. The US, on the other hand, will have a lot of trouble exporting their agricultural goods as Asian countries may not be willing to have the exports and the Latin American countries are not on good political terms with the US. The overall is that the US is going to have problems regarding their trade, but China may also face some consequences. I think that since they can not seem to agree on anything, there are going to unintended consequences, which will affect both countries economy but there will also be social and political implications. Social as in citizens of both countries will be having troubles, they will very likely have business problems, and unemployment will increase. The trust deficit will widen between the government and the people. The political implications will include trust being broken, and relationships will be prone to damage, and if this escalates further, it will also pose a threat to other countries. There will also be problems for the US businesses in China, which will have to return to the US, they will have issues since the production cost in China is way cheaper than in the US. The US also has a lot of tight regulations, higher labour and material cost which make difficult for businesses to compete against Chinese products in open market, to produce competitive goods the US will have to offer relaxation to the producers which seems unlikely to open in the current political environment.

To conclude, I would like to say that as this trade war continues, and unless this ends with an agreement to help both countries, everyone, may very well hold their breath because we may be approaching war between two of the world most economically developed countries. If the countries decide to do something like this, they should not only look at the economic implications but also social and political implications, as there may be unintended consequences.
Sources:
The US-China Trade War: A Timeline – China Briefing News. http://www.china-briefing.com/news/2018/09/10/the-us-china-trade-war-a-timeline.html
Tan, Weizhen. “US-China Spat Could Affect Fast-Growing Asian Trade, But It’s Also An Opportunity For Some Economies”. CNBC, 2018, https://www.cnbc.com/2018/06/26/us-china-trade-war-would-be-an-opportunity-for-some-asian-economies.html. Accessed 30 Sept 2018.
“How US Tariffs Are Expected To Hit China’S Growth Rates”. South China Morning Post, 2018, https://www.scmp.com/news/china/ecconomy/article/2160843/how-us-tariffs-are-expected-weigh-chinas-growth-rate. Accessed 30 Sept 2018

 

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