United States of America – China Trade war

United States of America – China Trade war

Abstract

Deep globalization has promoted a more integrated and efficient human society. Meanwhile,
it has become more unbalanced, uncertain and contradictory. The movement of
contradictions in the world tends to go from extremes to opposites. The development of
human society will see the emergence of several civilization centers, instead of one
civilization center taking the place of another. The current China-US trade disputes is one of
the important appear of the profound change. The contradictory movements of China-US
economic and trade relations are eternal while constants are relative, but changes in the basic
structure of China-US relations will take place over a long period of time. The China-US
trade problem is actually an imbalance problem, reflecting the deep-seated and complex
contradictions between developed and emerging developing countries in the global
transformation. To solve the current China-US trade war, we need to take a balanced line.
The China-US trade problem has accumulated over the past decades, and it will take some
time to solve them. A scrutiny of China-US trade disputes in the profound changes of the
world and the context of modernization shows that China has been working to address many
of the issues of concern, which complies with China’s general direction of reform and
opening-up and its goal to achieve all-round modernization. The most important thing both of
China-US need to consider is not a win-or-lose outcome, but how to convert the fierce trade
war to normal trade disputes and how to obtain a leading position in morals, strategies and
tactics in the game between major countries.

Objectives

 To study the trends of us–china trade in goods

 To understand exports of the united states to china
 To study the imports of the united states from china
 To study what causes of the us trade deficit with china
 To understand the reasons for imposing tariff sanctions by the United States
 To know the impact of trade war
United States of America – China Trade war 2

Introduction

The United States of America was established as an independent nation in 1776. It is the
world’s largest economy if we go by the nominal GDP and second largest if we go by
purchasing power parity. The United States has the world’s largest economy, is the world’s
largest producer of oil and gas, is the world’s largest trading center, has the largest industrial
sector, and has the largest financial markets and the world’s largest consumer market. As far
as venture capital and global research and development funding is concerned, the US
economy stands at number one in international ranking. The United States produces one-fifth
of the global manufacturing output. The real GDP grew by 2.3% in 2017, while in 2016, it
was 1.5%. The growth rate of real GDP was 2.2% in the first quarter of 2018 and 4.1% in the
second quarter of 2018. It is the best growth rate since Q3 2014. In 2007, the US economy
was four times that of China. There was a recession and the global financial crisis in 2008; as
a result, by 2012, the US economy shrunk to two times the size of China. In 2014, China
became the largest economy in GDP by purchasing power parity. China is at the second rank
in the world by nominal GDP. China had a GDP growth rate of 6.9% in 2017. China’s growth
rate has been three times that of the United States for the last 40 years.

The US–China trade relation is very old. In 1985, US goods exports to China were worth
$3855.7 million and US goods imports from China were worth $3861.7 million. It shows a
deficit of only $6 million. After that, the trade deficit of the United States has been
continuously increasing. If we see the trade of both goods and services, in the year 2017,
goods and services exports totalled $187.5 billion, and imports were $522.9 billion. The US
goods and services trade deficit was $335.4 billion in 2017.

The most important reason is that China produces low-cost consumer goods because of lower
labour cost. China has an exchange rate that is partially fixed to the dollar. China has a strong
influence on the dollar. It has become the largest loan provider to the US government by
buying US treasury notes. In December 2018, the US debt to China was $1.12 trillion. It
amounts to 28% of total public debt owned by foreign countries. China is buying US treasury
notes. It helps to keep US interest rates low. If China stops buying US treasury notes, it will
lead to an increase in the interest rate and then recession in the United States. However, this
would be against the interests of China as well, as US citizens would buy fewer Chinese
exports. US companies try to outsource jobs to China or India for cost cutting. It increases
unemployment in the United States. US manufacturing declined between 1998 and 2010, so
United States of America – China Trade war 3

jobs also declined by about one-third during this period. It has reduced US competitive ability
in the global market. Now, the United States does not produce certain goods that are very
popular with Americans such as consumer electronics. The decision to impose tariffs on
Chinese goods by President Trump has led to a protectionist policy.

There have been positive and negative effects of tariffs imposed on Chinese goods by the
United States. In some US industries, employment has increased, whereas, in others, there
have been lay-offs. This trade war has dealt a blow to American toys, putty, and art-and-craft
items. Consumer products have become costlier. A report published in the New York Times
dated January 2, 2019, says that Apple reduced its revenue expectations for the first time in
16 years because of poor iPhone sales in China, as there is a slowdown in China and trade
war with the United States. In the last quarter of 2018, the shipment of Apple’s iPhone has
declined by 20% in China. The US-based company’s revenue from the iPhone declined by
15% in the last quarter of 2018. Stock prices in the United States and China declined due to
trade-war fears. In China, stock markets declined by 20% in June 2018, as compared to its
value in January 2018. On June 27, 2018, the Chinese yuan declined to a 6-month low in
terms of the dollar. European shares also fell due to this trade war. Aerospace and defense
sectors in the United States have been affected by this trade war. The share prices of Boeing,
the largest exporter in the United States, have been hit, as China has started taking an interest
in the European rival, Airbus. There are many US companies such as mobile phones,
computer equipment, semiconductors, and clothing, which are vulnerable and will be affected
if China retaliates (Rao, 2018). Per the latest news, dated May 11, 2019, the Times of India
reported that President Trump hiked tariffs from 10 to 25% on Chinese goods worth $200
billion from May 10, 2019, Friday, after failure of high-level trade talks. This is expected to
raise prices for American companies and their customers across many sectors. Global stock
markets are expected to fall. Trump has renewed the trade war. He is encouraged to keep the
trade war going, as China’s exports to the United States have declined, and as a result, the US
monthly trade deficit with China dropped to its lowest level in March 2019, for the first time
since 2014. China has threatened to retaliate. It is very tough for China to impose high tariffs
on US products because it will escalate the costs of Chinese consumers and companies. The
Chinese authorities are trying to reach a “ceasefire” arrangement to stop the situation from
worsening.
United States of America – China Trade war 4

Conclusion

Under the influence of the law of balance, the development of human society, the theory and
practice of international economy and the process of China's modernization have the
trajectory and trend of moving around the balance line. The China-US trade dispute is a long-
term, complex and systematic political game. It is also a struggle between the national
interests of the largest developed country and the largest emerging developing country.
Sooner or later, this dispute will come, it is inevitable, and it will not be transferred by human
will. The deep-seated causes of this dispute mainly come from five aspects: first, reflects the
deep-seated and complex contradictions between developed and emerging developing
countries in the global transformation; second, reflects the complexity of China-US economic
and trade relations; third, reflects the inadequate preparation and estimation of China-US
changes in the world pattern; fourth, it reflects the China-US mutual understanding is not
enough. Fifth, reflects that economic and trade theory lags behind trade practice. The China-
US trade problem is actually an imbalance problem. In today's world, the developed and
developing countries are unequal, the market is unbalanced, and the gap is widening. To deal
with this new form and problem, we need to explore new models, new ideas and new ways.
To solve the current China-US trade war, we need to take a balancing line, balancing
production and balancing consumption. We need to understand, tolerate and compromise
each other. We need to discuss and negotiate specific solutions to the problem. This is the
requirement of the law of balance.

References

US Trade and Trade War, E-ISSN: 2469-4339, Management and Economics Research
Journal, Vol. 5, Iss. S4, Pgs. 12, 2019

Profound Changes of the World and China-US Trade Disputes, ISSN: 2326-9553 (Print);
ISSN: 2326-9561 (Online)