The Trade War between China and the USA

Tariff means that a country imposes taxes on imports with another country. This is done to motivate people to buy goods manufactured in one’s own country rather than buying imported goods at higher prices. This, in turn, has an effect of creating more jobs within the country and it boosts the national economy. And this is how a country can try to decrease the trade deficit with another country. Many western companies settle their factories in China because of the low labor cost because of the low standard of living of Chinese population. Producing the goods at lower prices and then exporting these goods to countries like the USA has been the primary factor in the Chinese economic growth. As a result, the US stands at $375 billion trade deficit with China as of 2017 (The US imports from China: $ 506 billion; The US exports to China: $130 billion). In his campaigns, Trump promised to lower the trade deficit with China. This tariff is the byproduct of that promise only.

 

Also, the USA has been very clear and communicative about the unfair policies China has been using to increase its market. (1. China has been promoting the unfair transfer of technology from America by imposing the US companies to disclose their technology and intellectual property if they want to do business in China. 2. China has been a currency manipulator from a very long time (more on this later).) This tariff move has come as a sort of punishment from the Trump government. The USA has placed similar policies on Mexico, Canada, and the Europian Union nations by taxing the imported steel and aluminum (among many others) from these nations. As a result, the car industry has suffered and reported a lower profit for the year 2018 (Ford and General Motors). These nations have retaliated by imposing tariffs on the goods imported by America. China cannot do this because it sells much more to the USA than it buys from them but the people who are following this trade war closely have said that China will not bow down in front of Trump.

 

This trade barrier does not only impact these two nations’ economy but other nations too. Asian countries are interlinked with each other’s trade profits or losses through supply chains. For example, Singapore serves as the largest transition hub for China. Many shipments destined for China make their way through this tiny nations port and that is exactly how Singapore has benefitted from this globalization and trade revolution. Many products which are assembled in China draw their subparts from other Asian countries like Malaysia and Indonesia. The elevated costs of Chinese goods will, in turn, affect the prices in Singapore and many south Asian countries. This is pointed out clearly by Singapore’s minister of trade, Chan Chun Sing, that “to produce a product, chances are it would be a global production chain, and if one part of the global production chain gets disrupted or distorted, it hurts not just one specific country, but all countries”.

 

The International Monitory Fund (IMF) has issued a report saying that this trade war has and will affect the world economic growth and predicted 3.7 percent growth as opposed to the earlier prediction of 3.9 percent.  Actually, this trade war is just not a war for fairer trades, it is a war to become or remain the global influence/leader over the world. What can America do to improve the situation: instead of aiming for the power all over the world, it can try to become a team player and a statesman. After all, you can do good only when your neighbors are doing well too.

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