U.S.

A-China Trade War

Response of U.S.A & China

Governments
 Background: Trade War
• U.S & China trade war started last year as major economic conflict between
both countries. Donald Trump increases tariffs and start different barriers on
Chinese goods.
• U.S claims that China is doing unfair trade practices by not following
international trade standards. However China alleges that U.S is afraid of
China’s rise as economic super power and wants to curb it (Lee 2019).
• In response to U.S tariff increases and trade barriers, China also imposed heavy
tariffs on US products in China. It resulted in stock market crashed in several
countries and prices of commodities go up
• Trade war is affecting the businesses globally as recession increases and future
uncertainty rises. There are job cuts, economic slump downs and inflation as
result of growing trade war between two economic giants (Kaur 2019).
• There is mix response from the international community because if this trade
war stays for longer, there will be more pressure on international business
markets.
 Response from U.S.A
• President of U.S Donald Trump wanted to reduce its high trade deficit of
more than $600 billion as part of his long term strategy to enhance the
use of local products. To implement the strategy, Donald Trump take
three major steps in 2018; tariffs on Chinese products, tariff on
automobiles from Europe and tariff on steel. As major trade deficit of U.S
was with China which is more than $400 billion in 2018, basic purpose of
U.S response on trade deficit was to counter China’s products (Lee 2019).

• Another response from U.S in trade war is to limit the transfer of U.S
technology to Chinese companies as many Chinese companies use
information technology and artificial intelligence systems from U.S
companies to manufacture their products. U.S imposed three tariffs on
Chinese goods which increase products price in U.S. (Huang 2018)
 Response from U.S.A (cont.)
• China is huge market in solar equipments as it is world leader in this
industry. U.S responded in trade war by imposing tariffs on Chinese solar
systems and some other electronic products in 2018. In order to develop
negotiation on bilateral trade, U.S warned China for further tariffs to be
imposed if China does not respond to its demands (Liu 2018).
• In order to increase more pressure on China to have fair trade
agreement, Donald Trump impose another high tariff on Chinese
products in May’ 2019. This tariff increase is mainly in meat industry and
musical instruments (Kaur 2019).
• Response from U.S government in trade war with China is mainly to
discourage the local community and companies to buy Chinese products
in order to boost its local economy.
 Response from U.S.A (cont..)

• U.S files legal case in World Trade Organization (WTO) against China so that
China could develop a policy of fair trade balance as per international
standards. This case highlights the subsidy given to Chinese government to its
companies in wind energy sector. U.S also files complain in WTO regarding
Beijing’s imposing of restrictions on payments through electronic means.
Other lawsuit in WTO is about giving too much subsidy to manufacturing
companies by Chinese government (Lee 2019).
 
• U.S also putting tough condition on China to join Trans- Pacific Partnership so
that China come on negotiation table with bilateral interests. Major condition
for China is to change its economy from export oriented to balanced trade
economy where export and imports of China have a balanced approach
(Huang 2018).
 Response from China

• China’s response against Donald Trump’s aggressive attitude was not as

aggressive as expected. China take two stances in response to this trade
war; i) it gives surety to U.S firms that they will be treated nicely and ii)
China also imposed tariffs on U.S products in response to U.S tariffs on
Chinese Products (Liu 2018).
• “If China were to punish US businesses, it will only help those trade hawks
in Washington who are trying to decouple China from the rest of the world.
China will certainly not step into that trap” said by Chinese official which
shows China’s response on this trade war (Kaur 2019).
• In response to U.S first sanctions imposed in 2018, China also hit back by
introducing tariffs on steel pipes, fruit and other such items. China further
introduce tariffs by 25% on more items as a response to U.S tariffs
 Response from China (Cont.)
• China also cancelled its U.S based contracts of imports worth $12 billion.
As U.S exports half of its soybean so this response from China badly hurt
soybean farmers of farmers in U.S. In order to facilitate a deal with U.S,
China made some adjustments too. China also announces that it will
reduce import automobiles tariffs. China also make a two way deal with
U.S where U.S would facilitate ZTE, a Chinese company, in terms of waiving
of tariffs. In exchange, Qualcomm company of U.S will acquire NXP (Huang
2018).
 
• China respond in current scenario to facilitate more investors by increasing
ease of doing business in China and promised to gradually clear hurdles in
foreign ownership of financial and automobile companies. China urge local
governments to increase incentives for foreign companies as a backup
policy of U.S-China Trade War (Lee 2019).
 References
• Lee, B. (2019). Assessing Made in China 2025, the US-China Trade
War and Ways Going Forward.
 
• Liu, T., & Woo, W. T. (2018). Understanding the US-China trade
war. China Economic Journal, 11(3), 319-340.
 
• Huang, Y., Lin, C., Liu, S., & Tang, H. (2018). Trade Linkages and Firm
Value: Evidence from the 2018 US-China'Trade War'.

• Kaur, A., & Gupta, G. (2019). An Insight into the Status QUO of US-
China Trade War. The Management Accountant Journal, 54(9), 81-
86.