The United States and China are acknowledged as nations ahead of the curve with the largest economic scales of the contemporary era. However, a closer analysis of the two nations’ economic status indicates that the U.S. have been recording a continuous trade deficit over the past decade, whereas China has seen an exponential growth in trade benefits. The focal cause to such contrasting economic performances lies within the trading relationship between Washington and Beijing.
The revenue made from exporting American goods to China was far outweighed by importations of Chinese products. Donald Trump had always expressed hostility towards Chinese economic policies, and imposing a 45 percent tariff on Chinese products was one of his pledges during the election campaign. Finally, in the turn of March, 2018, the tension between the two nations ignited into a full-scale trade battle. Being entitled as the greatest economic war in history, it is significant to gain insight on this ongoing economic war.
Trump’s signing of executive order to invade Chinese economy in the March of 2018 marks the official beginning of this trade war. In an attempt to decrease trade deficits by 375 billion U.S dollars, Trump had targeted to end China’s illegal subsidies, overproduction, and possibly, currency manipulation. On July 6, the U.S. imposed a 25 percent tariff on 34 billion dollars’ worth of Chinese products, a bold move that declared an actual strike on China’s economy.
These products included steel, aluminum and agricultural goods which were China’s primary trade goods. In response, China imposed the same percentage of tariff on 34 billion dollars’ worth of American products, clearly indicating a vindictive motive. By August, an additional 16 billion dollars’ worth of products were set with 25 percent tariffs on respective nations. The process only aggravates as the U.S. imposes a 10 percent tariff on the greatest number of products in trade history, an amount that adds up to over 200 billion dollars’ worth. By levying tariff on an additional 60 billion dollars’ worth of U.S. products, China endeavors to stand up against Trump’s uncompromising pressure. However, as the U.S. importation revenue overpowers that of China by 300 billion dollars, there were no existing trading goods left for China to put tariffs on.
Finally, on Dec. 2 of 2018, the two countries reach a truce agreement where no more tariffs are set for the duration of 90 days, under the circumstance that existing tariffs are not removed.
This can be understood as American intervention into China’s political fundamentals, a challenge against China’s communist governing system. In addition, opening up Chinese Internet industries has been demanded, allowing foreign-invested enterprises including Facebook, YouTube and Google to position themselves in Chinese servers. Moreover, an institution to confirm that terms and conditions of the negotiation is being properly implemented is to be installed within China. This signifies the strengthening of American surveillance, a provision that the Chinese are strongly refuting against. Such humiliating clauses ultimately lead to the degrading of the nation and its leader’s prestige, which is why this negotiation is considered a very sensitive matter.
With the continuing ambiguity of this trade war, World Trade Organization (WTO) has indicated that global GDP is predicted to decrease significantly, with South Korea’s GDP dropping by almost 0.65 percent. Uncertainty is discouraging global investors from releasing capital, which is a serious problem to global economic development. The Chinese have decreased their target economic growth rate by 6 percent, whereas the U.S has revealed to have experienced a 0.04 percent loss of national GDP. It is fair to say that this ongoing trade war is extremely detrimental to world economy, and that in the eyes of the global community, the trade war must come to an end. The world is at its attention as the two economic superpowers clash against each other.