The United States and China are the two largest economies in the world. Chinese foreign trade grew rapidly after its ascension into the WTO in 2001, with mutual trade between the US and China almost US$559 billion in 2019.
Basically, USA and China imposed additional tariffs on goods imported from the other country. This means buyers in the opposing country would need to pay higher import taxes to bring their purchases into the country. At its peak at the end of 2019, the US had imposed tariffs on more than US$360 billion worth of Chinese goods, while China had retaliated with import duties of their own worth around US$110 billion on US products.
The economic war between the world’s two largest economies flared up after Trump became President of America. US President Donald Trump promised during his 2016 presidential campaign to reduce the large trade deficit with China. In addition, Trump claimed that this trade deficit was largely caused by intellectual property theft, forced technology transfer, lack of market access for American companies in China, and subsidies Beijing has given to privileged Chinese companies. He also argued that this trade deficit was created due to China’s unfair trade practices. On the other hand, China believes the US is trying to restrict its rise as a global economic power.
The US took the first step on July 6, 2018, with a 25 percent tax on imports from China of about $ 34 billion, including cars, hard drives and aircraft parts. On the other hand, China retaliated by applying a 25 percent tariff on 545 products of US origin, worth US $ 34 billion, including agricultural products, automobiles and aquaculture.
The tax increase between the two countries continued until the 1st day of 2018. However in December 1, 2018, Xi Jinping and US president Donald Trump agree to a ceasefire at the G20 summit in Argentina. The US suspending a tariff from %10 to %25 on $200 billion of Chinese goods that was due to come into force on January 1. In response to this, China suspends tariffs on US-made cars and car parts for three months from January 1, and also resumes its purchase of US soybeans in December 14, 2018
But, in May 2019, things turned around again. After trade negotiations break down, the US increases tariffs on $200 billion worth of Chinese goods from %10 to %25. China responds by announce that it will increase tariffs on $60 billion worth of US goods from June 1.
In my opinion, on May 15, 2019, the peak of the trade war occurred. The US Department of Commerce announced that Huawei, one of the world’s best-selling technology brands, has been added to the “entity list”, which effectively prohibits US companies from selling to the Chinese telecommunications company without approval. On the other hand, China announces that it will establish its own unreliable entities list.
After this date, the two countries continued their trade war by imposing extra tariffs or bans on arious products. As of January 2020 tensions have finally eased as the two sides have signed a partial Phase I deal. Under the so-called “phase one” deal signed in January, China pledged to boost US imports by $200bn above 2017 levels and strengthen intellectual property rules. The document agreed to roll back tariffs and expand trade purchase.
This trade war seems to have harmed two major economies. The U.S. economy has mainly been hit on the consumer-side by the trade dispute, whereas in China, exporters have suffered the biggest loser. Also, this trade war did not only affect the United States and China. This war seems to be hurting other countries as well. For instance, Hong Kong and South Korea have suffered important losses, as they have major supply chains overlapping with both the U.S. and China. Meanwhile, Taiwan has seen industries return from the Chinese mainland.
It is an inevitable fact that the coronavirus causes enormous damage to the economies of countries. Therefore, the reduction of this trade war between the USA and China will benefit both countries. In the USA, with the impact of the elections and COVID-19, there has been great pressure on the economy. I think this pressure will continue these days when the coronavirus continues to increase. It is said that the trade war started by President Trump will continue under the presidency of Biden. But COVID-19’s pressure on the economy can delay this war. In addition, Biden is expected to follow a kinder trade policy, instead of Trump, who follows a protective trade policy.
As a result, we can see that this overprotective trade policy of the US harms its relations with all countries with which it has commercial relations, especially China. These attitudes of the US and China, which are the world’s largest economies, affect the entire world economy. I think the continuation of this war will result in bad results for both countries. However, it is a fact that the US
will leave this business with more losses. As I shared in the table above, the trade deficit with the US and China is getting bigger. Breaking away from China, which is the world’s largest producer, can cause great damage to US companies. In addition, as China has the largest population, it stands out as the largest consumer society. Apple’s production of special phone models for China shows how big a market is here. Extra tariffs on US products will reduce the share of the US companies in this market. For these reasons, it would be more beneficial for the US and China to end this trade war.
