Since the reestablishment of diplomatic relations between the United States and China trade transactions between the two countries have steadily evolved leading to the signing of multiple bilateral trade treaties. These treaties are meant to guide and improve trade agreements. China has undertaken significant economic reforms which have been complemented by the signing of comprehensive trade commitments of World Trade Organization (WTO), to liberate its trading with the United States (Zhai, 14). This has resulted in expanded commercial ties making China the U.S’ largest trading partner. Nonetheless, the bilateral trade agreements have progressively become more strained due to various issues that arise in any relationship. The inauguration of Trump administration has not made the situation any better owing much to prevailing trade deficit among the two countries and the “America First” slogan meant to prioritize American interests. This paper analyzes an article, “A trade war between America and China takes shape: …” to show tit-for-tat retaliations between the two countries.
Summary
Suspicious commercial relations between the U.S and China are gradually developing into trade war on the premise of exorbitant trade tariffs. These tariffs are increasingly becoming trade barriers which are aiming at discouraging importation of certain strategic goods. Rallying on the ballooning trade deficit with China, Trump administration ignited trade war by imposing inflated tariffs on the steel and aluminum imported from other countries including China. Just like any other competition, where an action of one player prompts the other player to react proportionally, China responded by imposing tariffs covering around $3bn of American exports to China. Fast forward to April 3rd, 2018, reacting to an alleged theft of intellectual property belonging to American companies by China, America has proposed 25% tariffs on a published list of 1,300 products from China. This list amounts to 9% of total goods imported by America whose value stands at $46bn. In light of tit-for-tat, China published its own list of 106 categories of products accounting for 38% of American exports whose value is estimated to be $50bn (economist.com).
The article states that since each side in a trade dispute lays out in detail the products to be affected it makes it easier to analyze their strategies. For instance, latest American list is aimed at curtailing various products gaining from China’s industrial policy. The policy “Made in China 2025” intends to dominate particular strategic economic sectors around the globe. Trump administration is guided by wrong assumptions that in order to strengthen certain industries, the administration ought to cushion such particular industry by blocking foreign competition (economist.com). In reality, this may make American manufacturers less competitive among the consumers because certain products such as steel and aluminum products have higher production costs when they are produced locally.
Opinion
A trade war between the U.S and China is likely to have negative effects majorly on the United States. While China is seen only as forced by circumstances to react, U.S is driven by jealous toward the China’s emerging superiority on the global map. The U.S is in denial that its policy-makers failed to formulate strategies that would make the United States retain its superiority in the world. The proposed list of Chinese products to be imposed a tariff of 25%, seems to be targeting products which are crucial to China’s industrial policy (economist.com). This can be seen as a deliberate intention to weaken China’s economic growth.
However, the U.S is bracing itself to be surprised by its move because China has published its list which although it complies with regulations of WTO, the list targets products from politically sensitive states as well as pressure points in America’s democracy such as industries with powerful lobbies like soybeans and aircraft. Consequently, such tit-for-tat retaliations demonstrate that trade barriers make industries weaker, not stronger. As such, urging a trading partner to change their behavior would be effective than imposing trade barriers. For instance, America in an attempt to contain the trade deficit with China, U.S should diplomatically persuade China to buy more of American products to avoid disruptions to the U.S economy (Zhai, 25).
Works Cited
Zhai, Fan. "Trade Cooperation and Conflicts between the United States and China: Risks and Realities." US-China Cooperation in a Changing Global Economy
(2017).p.12-30
A trade war between America and China takes shape. Retrieved from: https://economist.com/news/finance-and-economics/21739975-two-countries-threaten-descend-sequence-tit-tat-retaliations
