US China Trade War

The headlines are full of news of a trade war between the United States and China. Every day you read or watch some news in order to fill the blanks in or to have some knowledge about current affairs. And you’ve probably heard by now that China and U.S have announced tariffs on many of each other’s goods. 

This has many economists worried about the trade war.  A trade war, in case you’re not familiar with the term, is “an economic conflict in which states levy import limitations on each other in order to harm or damages each other’s trade.”

In response, the markets are doing their best imprint of a see-saw – dwindling and then rising over again. This is how the US and China trade war goes on. We are all familiar with the history and there is no country can match the USA in term of power and economic growth, but under the Trump Administration and in the aftermath of the Cold War, Washington failed to shape and competent the world system as it was recommended and need for the current world. After the presidential election, President Trump War with Xi is a real drama for us.

While witnessing history being made, it’s easy to say that development, modernisation and poverty alleviation are related to trade between nations. Unfortunately, the ongoing Sino-American trade war and the battle over the US access to the Chinese market and Chinese access to US technology, cold war, hot war, political war, and cultural war have come and gone.

War of words or trade war no one knows, as the dust has not settled yet. When the dust settles Trump will win the so-called Trade War, but China will exceed the American market and probably will become the largest market in the world. There will be a win-win game or a dispute with no win.

Peter Navarro, the US Director of Trade and Industrial policy, said Chinese wish to get Trump to the so the called bargaining table and let them keep having their will with the US which they did to the previous presidents. While Wang Yi, China’s foreign minister said that, they never want to have talk or negotiation, and we still don’t know whether they want to coordinate or not.

In the past four decades the trade relationship between the US and China expanded considerably, but is still fragile. More importantly, China accessioned in World Trade Organisation in 2001. Now China, after Europe and the US, is the third largest economy in the world and a major partner of US total merchandise.

The US total import from China in 2017 was US$ 505.5 billion which increased by 390% compared to 2001, in the same time its total exports to China has grown by 570% to US$ 129.9 billion. On other hands, China’s exports to the US is about US$ 153.9 billion making 8.4% and export  US$ 429. 8 which is increased by 19.0%. 

The recent trade war between China and the US not only disturbs both the US and Chinese markets but have also swayed global economy sternly i.e. the new emerging economic markets like Brazil, Russia India, etc. this isn’t just about China and US, it’s about the entire world, and particularly all those overseas investors who are investing in China and the US.

Trade war always came in being when a country wants to protect their domestic industries and create jobs, for short run this may be beneficial up to some extent, but for a long run its may costs the jobs, diminishing international trade, trigger economic growth and a depressed market.

Historically a trade war never produces a winner.  To find a solution, the pareties mihght look to free trade, peaceful coordination, providing trust and promoting understanding to promptly rise the global economy again.

Categories: Trade & Investment

Tags: China, Trade War, United States