Analysis: US-China Trade war

Reading time: 8-10 minutes.

The trade war is an economic turmoil conflict between the two countries. The countries in trade war levy hefty tariffs on imports of goods whereas in response the countries retaliate similarly which enunciates the promulgation of reduction in international trade. Due to increasing competition and rapid dynamic needs and wants of the society is the reason for the emergence of trade war. The country in conflict raises hefty tariffs or hindrance in import and of products in response to the barriers created by the other country

The proliferation of trade war emerges when a nation strives to create more jobs and increase economic capital of the country. The tariffs are the major source of stipulating profit incurred by export of products in the global market. As a result, satisfying products enunciates the prospects of more demand of the particular geographical product, which would receive more orders from the global customers, thus, unleashing the more job and profit opportunities for the country.

The global demand of the product unleashes the zeal to produce more products and increase tariffs. This increases the economic competition with the rival country which in turn creates a platform for trade war conflict between the countries. The recent example of a prominent aspect of trade war is US- China conflict which in turn both the countries disentangles the most of the economic relationship with each other.

Significant Development

 The ongoing conflict, US-China trade war has impacted the incurrence of hefty tariffs on import and export of goods, which not only affects US and China but also many intermediary countries. The whole world is getting affected with the trade conflict between these two countries.

The trade war between China, led by President Xi Jinping and the United States, led by President Donald Trump has been started in July, 2018 when China superseded the United States by becoming the largest economy of the world. Soon after that, President Donald Trump began levy tariffs and other trade barriers on China. The Unites States have accused China of the involvement of unscrupulous unfair trade practices, including inducement of forced technology transfer, theft of intellectual property rights, lack of market access for companies incorporated in America and creating a biased pricing range of products through state subsidies of chinese companies. Meanwhile, China believes that the United States is trying to restrict the rise of China being the global economic power.

In January 2020, The President Donald Trump and China’s Chief negotiator signed the first phase of a new trade agreement with China after two years of turmoil between the US- China that have rattled the economies all around the world. The deal includes the $200 Billion purchase of American machinery, goods and services by China inclusive of special tariff charges for China. This deal has reshaped the relations of China-US for the first time towards a future of fair and reciprocal trade.

Implications for India

Despite the ongoing tension between the US-China trade war, India is seen as an emerging trade partner in future. The United States and China are on its peak of levying hefty tariffs to each other. China said that it would impose higher tariffs on $60 billion US goods from 1st June, 2020 in retaliation against US tariff hike over Chinese products.

This has proliferated the much awaited significant shift in the manufacturing sector in India which could be a golden opportunity for India. India has already gained $755 million dollar additional exports mainly of chemical, ores and metals to the US.

The United Nations in a report has said that India has the potential of becoming a boom sector for export of products and is among the few economies that can take benefit from the ongoing trade tensions between China and the United States.

Critical Analysis

The US-China trade war has impacted the economy all over the world rigorously which could spark a recession. The Trump administration has advocated tariffs to reduce US trade deficits and promote domestic manufacturing. The United States stated that China has manipulated their currency unscrupulous.  China was costing the American economy the hundreds and millions of dollars a year because of unscrupulous trade practices which in turn is tampering the due process of relations between the two countries. Trump said that the United States has the trade deficit of $500 billion a year, with the additional intellectual property theft costing additional $300 billion a year. However, China is having a perception that the ideology of putting hefty tariffs is to curb the rise of China as the world’s largest global economic power.

Both the countries have put hefty tariffs against each other’s products. Trump policy aims to encourage the consumers to buy more of American products by making imported goods much more expensive. The USA has levied  more than $ 360 billion tariffs of chinese goods, meanwhile China has retaliated with tariffs on more than $110 billion on US products

Conclusion

The proliferation of ongoing trade war between US-China has impacted the economy all around the world. This has objectified the current scenario of being the world’s largest economic power, despite being the overall development of the world. Although both the countries come together in January, 2020, it is all about showing trade war settlement between the countries. China has started imposing tariffs on above $60 billion goods from the US, while the US has removed the ties with China and also stopped the funding to world trade organization to some extent.

This dispute seems to be never ending because United states of America is the largest economic hub of the world, although china has superseded US in 2018, due to which the imposition of tariffs have been promulgated which not only affects the economy of both the countries, but affecting the economies of all over the world.

Author: Jagrit Chawlal from Guru Gobind Singh Indraprastha University.

Editor: Silky Mittal, Junior Editor, Lexlife India

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