TRADE WAR: CHINA-US

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‘China is neither an ally or a friend –they want to beat us and own our country.’ Mr. Trump tweeted before the presidential elections, he drew attention with his tweet about US-China economic relations. He has implemented his own policies since he became the president. Reducing the current trade gap is one of the priorities of Mr. Trump. However, he encourages consumers to buy American goods by making goods that imported more expensive. Over the past year, world’s two largest economies have imposed tariffs on each other’s good which values of billions of dollars. 

Several times, in Beijing and G20 Summit in Osaka, world’s two largest economies came together in order to build consensus on the tariff issue but they made ‘short dated’ agreements or the negotiations were failed. According that agreements both US and China will refrain from increasing tariffs or imposing new tariffs so two sides will work towards a longer trade deal. Both sides honoured the agreement during the term of agreements. Excluding term of agreements, US and China continued implementing tariffs for instance in the near future. 

The US increased tariffs on US$200 billion worth of Chinese goods from 10 percent to 25 percent, as the US and China . In response, China’s Ministry of Commerce releases a statement announcing that it “deeply regrets” the tariffs and that “necessary countermeasures” will be taken. Beijing hit back with tariffs ranging from 5% to 25% on US goods including chemicals, coal and medical parts.​1 ​Total US tariffs implemented exclusively to Chinese goods: US$550 billion and total Chinese tariffs implemented exclusively to US goods: US$185 billion.​2

This visualization is based on monthly reporting of the nominal value of imports and exports between the US and China. In the visualization itself, the blue boxes represent the value of exports from the US. to China, while the pink boxes represent the value of imports from China to the US The gray boxes with the negative number at the end represent the deficit, which is calculated by subtracting the exports from the imports. Every year from 2009 to 2018, the US. has imported more goods from China than it exported to China and over the past ten years, the trade deficit has almost doubled. For every year except 2016, the total volume of trade between two countries has steadily increased.

China-US stock indexes to nose-dive. The US-China trade war has been uncertainly a great source for financial markets over the past year. That uncertainty has weighed on investor confidence around the world, and has contributed to losses. The latest exchanges between the United States and China over tariffs and currency made clear that trade tensions between the world’s largest economies aren’t going away anytime soon. 

Apparently the tariffs don’t affect just the market of US and China but also affect significantly the economies which trade with US and China or act at them supply chain. Reciprocal policies lead to a news uncertainties in international market by the way stock exchange values, lower interest rates, exchange rate, economic policies, potentially higher prices and more economic anxiety. The headlines may seem theoretical, but if the dispute drags on, there are real-life ramifications for workers’ wallets, including their savings, debt loads and spending power.

The US Treasury declares China as a currency manipulator, after the yuan sunk to 7 against the US dollar – it’s the lowest level in 11 years – in apparent retaliation to the new punitive tariffs threatened to apply on the remainder of Chinese imports. The declaration accuses China of manipulating its currency “to gain unfair competitive advantage in international trade,” and states that the US Treasury Secretary will engage with the International Monetary Fund to eliminate the advantages created by China’s latest actions.​Several time both sides of trade war and affected countries take legal action at the WTO against the US for its tariffs. China has brought for third lawsuit to the WTO challenging US tariffs’ against Chinese imports. The US previously published a written defense for the first of the three legal cases brought by China, asserting that the current set of tariffs should not be judged at the WTO. 

“If the trade situation gets worse, the Fed will cut rates by more in an attempt to limit the damage to the economy,” said Brian Rose, senior Americas economist at UBS Global Wealth Management as an extended trade war could be more bad news for the overall economy.​5 Businesses may hold off from investing in new plants or hiring until a trade deal is in place. 

Hatice Eryilmaz
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