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All you need to know about the US-China trade war

06.06.2019
Article from AFRIC Editorial
The US and China are the world’s economic superpowers, both fighting to be at the top. This is evident, as the two have been plunged in a trade war that seems to be the worst the world has witnessed.

During his electoral campaign, Donald Trump promised to make America great again in every aspect. Regarding the economic aspect of this promise, President Trump is bent on rectifying the unfair trade relations the US has had with China over the years. To accomplish this, US president Donald Trump introduced tariffs on most of America’s trade partners; Canada, the EU, Mexico and most especially China; thereby increasing the prices of most foreign goods. This move encouraged consumers to buy locally made goods, thus retaining capital in the country.

At this point, China and the US are engaged in a tariff and levy game; the US has imposed $250 billion worth of tariffs on China, and plans to increase to $325 billion. In a bid to fight back, China has imposed levies on $113 billion worth of American goods, in addition to threats of “qualitative” retaliation against American companies.

USA main commercial partners

How did they get here?

Trump’s desire to correct the unbalanced trade relations with China dates back to 2016 during his campaign for the American presidency; when he said “we cannot continue to allow China to rape our country and that is what they are doing. It’s the greatest theft in the history of the world”

The US implemented the first 30% tariff on China in February 2018 and this was on solar panels and washing machines, which they called the “the global safeguard tariffs”. A few months later, the US implemented a 25% levy on 818 Chinese imports at all American port entries.

The two economic superpowers agreed to a temporary 90-day ceasefire when they met at the G20 summit in Buenos Aires, but this did not help the situation as the disagreements continued. Despite the talks held between representatives of the US and China, the two have been unable to strike a deal

In May 2019 trump accused china of not respecting promises made on past trade commitments, and promised to raise tariff rates, and placed an additional $300 billion worth duties on Chinese goods. In retaliation, China announced a raise in tariff rates on $60 billion worth of American products by June 1.

It should be noted that on May 15, Donald Trump signed an executive order barring American companies from using telecommunications gears from foreign competitors which were declared as threats to national security by officials; a move that is considered directly targeted on China’s  Huawei.

Why the hit on China’s Huawei?

In recent days, the trade war between China and US has been geared towards the technological sector. Apart from being the world’s economic and political superpower, America desires to hold the position of world’s technological superpower. Unfortunately, the US sees China as a major threat to achieving this goal due to China’s rapid growing technology and their growing quest to dominate other emerging technologies. This is evident in China’s vision 2025; seeking to lead the world in artificial intelligence (AI), robotics and most especially the 5G networks.

Despite the fact that Huawei’s Chairman Liang Hua told reporters in Shenzhen that “we are willing to sign a no-spy agreement with countries”, Trump is ready to impair the quality of relations between china and the UK, because of the UK’s intelligence-sharing arrangements with the US. “We have an incredible intelligence relationship and we will be able to work out any differences. This is a truly great ally and partner and we will have no problem with that.” He also told the press that “We are going to have absolutely an agreement on Huawei and everything else”. This will be a tough blow to China and they will not hesitate to fight back.

Possible consequences of the US-China trade war

It is commonly said that when two elephants fight, it is the grass that suffers. In this light, the trade war between the US and China is bound to affect the weaker economies that depend on the US and China to grow, not to talk of Chinese and American economies.

The trade war between China and the US will slow down economic growth in both countries if they are unable to strike a deal in the nearest future. The amount of money both governments spend on tariffs and levies could be invested in more profitable ventures.

This war has also slowed down production in companies and producers whose products are targeted by both countries, such as soy farmers in America who export to China.

Another effect of the trade war is unemployment. Many companies may be forced to lay off some workers due to reduced exports production rates.

America and China are role models for many economies around the world and they need to set a good example. With this on-going trade war, there are risks of frictions developing in relations between mutual partners to the two countries at war, as they will have to choose a side or face America or China’s wrath. This could lead to a more serious global war.

Article from AFRIC Editorial

Credit image : google image

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