What are the implications of the current “trade war” between the United States and China? Where will the continuing negotiations lead each of these countries in their development, and relationships with one another as the top two-producing countries in the world?
During my time living in mainland China several years ago, I became acquainted with an American man who was living as an expat there while working for a multi billion-dollar Chinese baby formula company’s international relations department. He and his wife lived in a lavish apartment in Shanghai, and I was able to speak with him one evening about his business. If his large, luxurious apartment was not enough of an indicator of the wealth that his company had accumulated and could thus share with him, then surely what he discussed with me about his enterprise was. He mentioned the recent trade endeavors he had lead with multiple other countries to sell his product, and the vast profits that were soon to come once he launched their product further abroad. He worked to market his product to accessible countries, and within only a number of years had made them one of the highest grossing companies in all of China.
China, through millions of enterprises like this one, is rapidly advancing in the world economy’s stage. Currently the country ranks 2nd worldwide in terms of GDP, with 12.238 trillion dollars as of 20171. For fear that China might overtake the United States on the stage, or for other reasons, such as escalating fears and tensions against Chinese technology conglomerates such as Huawei2 (that would eventually lead to national security charges pressed against them this year3), U.S. President Donald Trump and his cabinet have increasingly enacted legislation to further inhibit U.S.-China trade efforts. This has led to what has been called the “U.S.-China Trade War” by most everyone except Trump himself, who called the efforts simply actions to reduce the U.S. trade deficit of $500 billion a year4. Director of Trade and Manufacturing Policy in Trump’s cabinet, Peter Navarro, a strong proponent of reducing U.S. trade deficits and setting high tariffs, has also been a key player in such legislation enacted in the past few years, stating that China purposely looks to undermine U.S. trade plans by undervaluing their own currency and thus being able to sell their own exports cheaper, in turn making it harder for the U.S. to sell their own goods abroad5.
The first actions that sparked the U.S.-China Trade War began in early 2018, as Trump directly ordered tariffs to be placed on billions of dollars of Chinese goods6. China retaliated a few weeks afterwards in April of 2018 by imposing their own tariffs on a small portion of U.S.-imported goods such as airplanes, cars, and pork; the total product that received tariffs was estimated to be 0.3% of the U.S. GDP7. Here began a pattern repeated over the past year and a half; tariffs and retaliatory tariffs placed by one country and the other. In June of 2018 an escalation was reached with Trump placing a 25% tariff on $50 billion of Chinese exports, after which China formally declared a “trade war” and in retaliation did the same to billions worth of U.S. dollars8. Amidst the Huawei controversy and detainment of Huawei CFO Meng Wanzhou last month, Trump also signed an executive order further restricting exports of U.S. technology to countries or companies deemed “adversaries” of the United States9.
The United States and China are deeply embroiled in a bitter dispute that has only just begun. Again and again news comes of trade restrictions that one has placed on the other in order to keep the country’s footing as a world political power. Even as China continues to face various countries’ inquiries into the security of their technology exports, their GDP is rising at a rate that may very well pass that of the United States in the near future10. Looking at how the Huawei crisis is (or isn’t) resolved may also become an indicator of China’s future economic status, perhaps taking a downward turn depending on if countries decide to cease technology imports from them altogether; on the opposite end of the spectrum, economic success may continue for China if the country is able to persist in trading its products cheaply in spite of security concerns and rising tariffs from their economic rival. Escalation might continue until one country simply becomes strained under the weight, or the two countries may decide to eventually lay off trade restrictions on the other, but we can only watch and see.
1) “GDP (current US$).” Data. Accessed June 26, 2019. https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2017&locations=CN&start=1960&type=points&view=chart.
2) Rogin, Josh. “NSA Chief: Cybercrime Constitutes the “greatest Transfer of Wealth in History”.” Foreign Policy. July 09, 2012. Accessed June 26, 2019.
NSA Chief: Cybercrime constitutes the “greatest transfer of wealth in history”
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3) “Acting Attorney General Whitaker Announces National Security Related Criminal Charges Against Chinese Telecommunications Conglomerate Huawei.” The United States Department of Justice. January 29, 2019. Accessed June 26, 2019. https://www.justice.gov/opa/gallery/acting-attorney-general-whitaker-announces-national-security-related-criminal-charges.
4) Smith, David. “Trump Plays down US-China Trade War Concerns: ‘When You’re $500bn down You Can’t Lose’.” The Guardian. April 04, 2018. Accessed June 26, 2019. https://www.theguardian.com/business/2018/apr/04/trump-china-trade-war-concerns-import-taxes-stock-market.
5) “Peter Navarro Talks Trade and Tariffs.” CNBC. March 15, 2018. Accessed June 27, 2019. https://www.cnbc.com/video/2018/03/15/peter-navarro-talks-trade-and-tariffs.html.
6) Diamond, Jeremy. “Trump Hits China with Tariffs, Heightening Concerns of Global Trade War.” CNN. March 23, 2018. Accessed June 27, 2019. https://www.cnn.com/2018/03/22/politics/donald-trump-china-tariffs-trade-war/.
7) Biesheuvel, Thomas. Bloomberg.com. April 4, 2018. Accessed June 27, 2019. https://www.bloomberg.com/news/articles/2018-04-04/as-china-fires-back-in-trade-war-here-are-the-winners-and-losers.
8) Lynch, David J., and Emily Rauhala. “With Tariffs, Trump Starts Unraveling a Quarter-century of U.S.-China Economic Ties.” The Washington Post. June 15, 2018. Accessed June 27, 2019. https://www.washingtonpost.com/business/economy/trump-imposes-import-taxes-on-chinese-goods-and-warns-of-additional-tariffs/2018/06/15/da909ecc-7092-11e8-bf86-a2351b5ece99_story.html?utm_term=.f7e1b8b4540e.
9) “Trump Signs Executive Order Targeting Huawei.” CNBC. May 15, 2019. Accessed June 27, 2019. https://www.cnbc.com/video/2019/05/15/trump-signs-executive-order-targeting-huawei.html.
10) Fickling, David. “China Could Outrun the U.S. Next Year. Or Never.” Bloomberg.com. March 8, 2019. Accessed June 27, 2019. https://www.bloomberg.com/opinion/articles/2019-03-08/will-china-overtake-u-s-gdp-depends-how-you-count.