USA and China trade war and its impact on Bangladesh

China & United States have been engaged in a trade war through increasing tariffs and other
measures since 2018. Hong Kong economics professor Lawrence J. Lau argues that a major
cause is the growing battle between China and the USA for global economic and technological
dominance. He also argues it is also a reflection of the rise of populism, isolationism, nationalism
and protectionism almost everywhere in the world including US.
Areas of disputes: Peter Navarro trade and manufacturing policy director of white house claims
that the cumulative trillions of dollars Americans transfer overseas as a result of yearly deficits
are then used by those countries to buy Americans assets as opposed to investing that money in
the US.
Another area of disagreement concerns allegation of Chinese espionage against the United
States.US officials, business people, academics and organizations have accused China of either
stealing American intellectual property and military technology or adopting and enforcing
policies which put US patent holders at a disadvantage in Chinese markets by forcing foreign
companies to engage in joint ventures with Chinese companies which in turn gives Chinese
companies illicit access to their technologies.
China’s response to US allegations: In march 2019, the national people congress endorsed a
new foreign investment bill to take effect in 2020 which explicitly prohibits the forced transfer of
IP from foreign companies. China had also planned to lift restrictions on foreign investment in
the automotive industry in 2022. China implemented retaliatory tariffs against the US, there was
a reduction in tariffs on all other exporters which put US exporters at a competitive disadvantage.
Its impact on Bangladesh: The impending effect of the trade war on supply chain dynamics and
investment patterns could help Bangladesh emerge as a potential winner from the conflict. This
trade war will generate additional USD 400 millions exports for Bangladesh. The garments
sector is expected to reap the most benefits as it accounts for 80% of Bangladesh’s total exports.
Bangladesh enjoyed a 6.46% growth in share in the USA’s market during the first three quarters
of 2018.
To avoid higher tariffs factories are relocating from China to elsewhere in Asia. Bangladesh has
more competitive advantages than its competitors such as Cambodia and Vietnam because of
labor intensity.
Bangladesh face US duties of 15.2% of the total value of exports which has a possibility to ease
if the US wants to increase imports from Bangladesh to minimize its gap from Chins.
Bangladesh sees an increase in FDI from china to be higher than forecasted through factory
relocations, especially in the growing export processing zones (EPZ) as the trade war increases
the costs of doing business in China.
Since Bangladesh is a member of the Belt and Road Initiative(BRI), it is more meaningful for
China to increase the investment in sectors of Bangladesh that are effected in China by the trade
war.
Putting all these together, we can say that the unwarranted trade war between the US and China
opens a sudden window of opportunity for Bangladesh. However whether Bangladesh can reap
those benefits will depend on a host of factors. Bangladesh is struggling with a crumbling
infrastructure, a weak rule of law regime and a poor business environment. Many observers are
also alarmed Bangladesh Government’s excessive and reckless borrowing from Chinese credits
may put the country in a long term debt trap like some other countries- Djibouti, Tajikistan,
Kyrgyzstan, Laos, Maldives, Mongolia, Pakistan, Montenegro.