Trade War Between US And China

Root Causes of Trade War

• The U.S. trade deficit with China was $419 billion in 2018
• U.S. exports to China were only $120 billion
while imports from China were $540 billion.

What is TRADE DEFICIT?

The amount by which the cost of a country's imports exceeds
the value of its exports.
Root Causes of Trade War
The biggest categories of U.S. imports fromChina were

&
 Root Causes of Trade War
From U.S.
manufacturers that send raw materials to China for low-cost
assembly.
Once shipped back to the United States, they are considered
imports.
 Root Causes of Trade War
China's biggest imports from America are
 Annual Trade Deficit
• Since 2012, the U.S. trade deficit with China has increased.
• It was $315 billion in 2012, rose to $367.3 billion in 2015,
then fell to $346.9 billion in 2015.
• In just two years, it's increased to $419.2 billion.
 Causes
• China can produce many consumer goods at lower costs than other countries can.
• Americans, of course, want these goods for the lowest prices.
How does China keep prices so low?
Most economists agree that China's competitive pricing is a result of two factors:

• A lower standard of living, which allows companies in China to pay lower wages to
workers.

• An exchange rate that is partially fixed to the dollar.

 Causes
 President Trump promised to lower the trade deficit with China.

 On March 1, 2018, he announced he would impose a 25% tariff on steel imports and
a 10% tariff on aluminum.

 On July 6, 2018, Trump's tariffs went into effect for $34 billion of Chinese imports.

 China canceled all import contracts for soybeans.

 Causes
 Trump's tariffs have raised the costs of imported steel, most of which is from China.

 Trump's move comes a month after he imposed tariffs and quotas on imported
 Causes

China has become a global leader in solar panel production.

The tariffs depressed the stock market when they were announced
Tension between US and China
 Evolution of trade in the US and China
(Change of tariffs)
Over 1,300 categories of Chinese imports were listed for tariffs, including aircraft parts, batteries, flat-
panel televisions, medical devices, satellites, and various weapons.

March 22, 2018. Trump asked the United States trade representative (USTR) to investigate
applying tariffs on US$50–60 billion worth of Chinese goods.

April 2, 2018. Ministry of Commerce of China responded by imposing tariffs on 128 products it
imports from America, including aluminum, airplanes, cars, pork, and soybeans (which have a 25%
tariff), as well as fruit, nuts, and steel piping (15%).
On April 5, 2018, Trump responded saying that he was considering another round of tariffs on an
additional $100 billion of Chinese imports as Beijing retaliates.

The next day the World Trade Organization received request from China for consultations on new
U.S. tariffs.

April 4, 2018. Trump denied the existence of a trade war, saying "that war was lost many years ago
by the foolish, or incompetent, people who represented the U.S." He added: "Now we have a trade
deficit of $500 billion a year, with intellectual property (IP) theft of another $300 billion. We
cannot let this continue."

May 15, 2018. Vice Premier and Politburo member Liu He, top economic adviser
to president of China and General Secretary Xi Jinping, visited Washington for further
trade talks.[
 May 20, 2018. Chinese officials agreed to "substantially reduce" America's trade deficit with China by
committing to "significantly increase" its purchases of Americangoods

May 29, 2018. The White House announced that it would impose a 25% tariff on $50 billion of
Chinese goods with "industrially significant technology;" the full list of products affected to be
announced by June 15, 2018.

June 15, 2018. Trump declared that the United States would impose a 25% tariff on $50 billion of
Chinese exports. $34 billion would start July 6, 2018, with a further $16 billion to begin at a later date.

China's Commerce Ministry accused the United States of launching a trade war and said China
would respond in kind with similar tariffs for US imports, starting on July 6, 2018.
 Current Circumstance of Trade War
US accused China
Stealing intellectual property
Current Circumstance of Trade War

• US-China trade conflict is becoming a tech war.

• China wants to be the most powerful economic power and the
technological leader in the world.
• They set out their ambition in plan called Made in China.
• China tech industry is now so vast and cutting-edge.
Current Circumstance of Trade War
• Uses artificial intelligence to boost economy and surveillance.
• Gave green light for local 5G rollout amid tech tensions with US.
Huawei has become a central part of the US-China
trade dispute
US added Huawei to its “entityList”
US restrict Huawei’s ability to trade with US Firms
• Google has barred Huawei From Some Updates to the Android operating
system
Trump tweet on his
twitter on Jul 15 2019
Impact of Trade War on Global Economy

• In protectionism scenario, Global GDP

• In 2018, decrease 0.1%
• In 2019, decrease 0.8%
• In 2020, decrease 1.4%
 Global economic growth

Global economic growth in 2019 and 2020 is only marginally

above our 2.0% threshold for a world recessions.
 Impacts on US economy

-US’s farmers face losses block of soybean buying

by China
Impacts on US economy
• Due to inflation, Frustrate the stock price and housing price
• 6% inflation rate for several years would help to resolve the US debt
problem, listing wages and stimulation economic growth
• But inflation 10% or above would be negative impact
• Compared with the baseline level, real US imports fall 4.5% in 2020
 Impacts on Chinese economy

• Largely effect industries linked to strategy in rid

and long run
 Impacts on Chinese Economy
• Due to move productive of multi-national companies, real global
export are 2.4% below the baseline level 2020 especially China &
three America countries
• Industrial production grew 5.4% in November 2018 (lowest rate
of China Within 10 years
Charles Kindleberger