US-China Trade War



In the last three decades, China has emerged as a Global Economic Powerhouse in the world surpassing the USA and other major developed countries. It had earned the title of ‘largest trading nation in the world’ in 2013 leaving behind the USA, who held the title for many decades. This created immense wealth for China and its people. 


The overall value of China's trade had increased from 100 billion USD in 1988 to more than 4 trillion USD in 2013 which is the highest growth achieved by any country in the world in such a short period. The current value of China's export stands at 2.2 trillion USD, while their Import value is 1.8 trillion USD, thus creating a massive balance of payment surplus of 400 billion USD for China. This raised concerns all over the world especially the USA, which is the largest trading partner of China and continuously facing trade deficit against it.


On April 4th, 2018, US President Donald Trump said, “We have a trade deficit of $500 billion a year, with intellectual property (IP) theft of another $300 billion. We cannot let this continue." This statement was followed by a series of measures were taken by the US government by increasing tariffs on 1300 Chinese goods including parts of aircraft, satellites, and medical devices. The Chinese government retaliated by increasing tariffs on 128 US goods accounting for 0.3% of US GDP. This sparked a conflict between the two countries resulting in an increase in tariffs by both sides multiple times collectively referred to as the US-China Trade War.


The conflict also spread to multilateral forums like WTO and G20 summit with many countries supporting the move by the USA. On 1st of June, 2018, the European Union launched WTO legal complaints against China's alleged forced ownership-granting and usage of technology that is claimed to discriminate foreign firms and undermine the intellectual property rights of EU companies. They are allegedly forced to establish joint ventures to gain access to the Chinese market. The European commissioner for trade Cecilia Malmström said "We cannot let any country force our companies to surrender this hard-earned knowledge at its border. This is against international rules that we have all agreed upon in the WTO." 


Many other countries like Japan and Australia are also working on a joint strategy to tackle the problem. U.S.–Mexico–Canada Agreement (USMCA) was revised on 30 November 2018 to prevent any Non-market economy like China to take advantage of it. On this occasion, Jorge Guajardo, the former Mexican ambassador to China said "One thing the Chinese have had to acknowledge is that it wasn't a Trump issue; it was a world issue. Everybody's tired of the way China games the trading system and makes promises that never amount to anything.


China seems to be ready for this battle, but there are indications it is already feeling the strain. Tech companies; at least 50 to date; are in the process of moving significant portions of their manufacturing operations out of China and back to other countries to avoid the revised US tariffs. During his recent visit to China, the Indian External Affairs Minister ‘S Jaishankar’ raised this issue with his Chinese counterpart and China agreed to address the issue. 


So far many countries have raised voices against China. The ongoing trade war between the US and China is not likely to simmer down any time soon and can have a strong impact on the global economy. The IMF has also reduced the global growth forecast to 3.2% from 3.6% due to the ongoing trade war. This may even lead to greater consequences like isolationism and protectionism if the countries do not come together and build a strategy for the future. The event is also an opportunity for many developing like India to raise on the occasion and offer an alternative to imperialist China and address the challenges of Global Trade.

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