With bilateral trade between the U.S. and China, estimated to be worth $710 billion a year, a blooming trade war benefits no one. The causes of this trade war go beyond issues such as intellectual properties and deficits; it reflects a bigger pattern that the U.S. is wary of a growing challenger threatening its global influence.
Despite ongoing negotiations, there are no signs to suggest the trade war between the U.S. and China is about to end. The U.S. President Donald Trump threatened to impose more tariffs on China worth another $267 billion. This is in addition to existing tariffs of $50 billion and imminent tariffs on another $200 billion worth of Chinese goods.
All the proposed combined tariffs will be worth $517 billion, virtually the entire Chinese exports to America. China has vowed to respond if the latest tariffs come into force. This escalating trade war between the two largest economies in the world makes no economic sense. The trade between the U.S. and China amounts to roughly $710 billion a year. In a globalized economy, China and the U.S. are highly dependent on each other. Earlier in the year, U.S. Department of Commerce has banned U.S. companies from supplying components to the Chinese telecom equipment maker ZTE which resulted in the company being unable to function for a few months, and the impact of new tariffs has already harmed American businesses – from aircraft manufacturers to baby cot makers.
The potential damage to economic growth and job losses will be severe on both sides. So what are root causes of this damaging trillion-dollar trade dispute? The American rationale for imposing these tariffs is well documented. It started with the U.S. Trade Representative’s Section 301 investigations and concluded the alleged Chinese theft of American intellectual properties and forced technology transfers as the main justification for imposing tariffs. Donald Trump’s insistence on cutting the trade deficit with China is another motivation. However, China has already committed on greater protection of intellectual property and ending mandatory technology transfer in joint ventures. T
here are no immediate signs to suggest tariffs actually work, China’s surplus with the U.S. increased by 10% in August to $31 billion.
By Qing Shan Ding – World Financial Review
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