It’s a Trade War, War War!

Trump threatened to pull out from the WTO, is a trade war especially with China. This is due to his reasoning that China should not be in the list of developing nations. According to Bloomberg 2019, China states they are still developing and need the space and flexibility to do so despite being the world’s second biggest economy. With the one road belt initiatives by China, it is understandable that Trump is nervous before China could undeniably overtake them as the world’s leader and biggest economy. Additionally , Trump have reported that the USA currently have the biggest trade deficit in the “ history of the world” with china  ($504 billions) and wishes to reduce this deficit by at least a $100 billion through tariffs and by doing so protect American companies from rivalry with Chinese imports so as to circumvent the loss of jobs and sustain the creation of jobs for the American citizens.

Besides complaining to the WTO for violating intellectual property rights, Donald trump has increased import duties on solar panels, washing machines, imposed tariffs on steel and aluminium imports as well as goods and services imports from China. He also circumvents Chinese takeovers of American companies (economyria, 2019).  According to economyria 2019, China exports about $200 billions in terms of electronics, information and communication as well as aerospace goods to the US (2017) and thus would hurt the Chinese exports substantially.

China has hit back with an imposed tariffs of US imports of $60 billion and have imposed tariffs on American products such as soybeans, cars, chemical products. The fact that china includes agriculture and food and beverages such as soybeans, whisky, beef, corn and wheat will be downhill road for trump as it is likely to affect southern states were, he garnered the most support during his presidency. The trade deficit has grown much especially in 2019 after starting to go downhill in 2018. After he imposed such tariffs, the trade deficit has accumulated substantially which did not go according to his plans of rejuvenating the manufacturing sector as he promised in his 2016 elections with the September figures of 2019 to be the lowest since the great recession in June 2009 (Grossman, 2019).

This has affected globalisation substantially, as we are now in a globalised economy and if china and USA engage in a trade war the countries especially mutual trading partners will be caught in the cross-fire of this war and may be push to take sides which is unhealthy for international trade. There are no winners in a trade war and if a winner must be named, it will still be a pyrrhic victory.  Other Asian economies that are intertwined with China’s wealth and access to trade especially through global supply chain networks and trading partners like South Korea and Singapore who have good relationships with the USA might be implicated in the crossfire. Singapore especially as it is trade dependent. China will definitely be propelled to continue in its initiatives such as the one road, one belt strategy as it diversify its trading routes, hubs and regions away from the USA in regions and countries like South Asia (Nepal, Sri Lanka and Pakistan), central Asia and Africa. As part of One-Belt-One Road (OBOR) project of China (where they try to expand construction projects in many “developing ” economies) through China Pakistan Economic Corridor (CPEC) and the central Asian cargo traffic is now connected to the Gwadar Port (Pakistan)

To find out more about China’s One Belt, One Road initiatives check out :

https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative

Sources:

https://www.theguardian.com/cities/ng-interactive/2018/jul/30/what-china-belt-road-initiative-silk-road-explainer

https://thehill.com/policy/finance/390991-wto-advances-eu-canada-complaints-against-trumps-trade-moves

https://www.piie.com/blogs/trade-and-investment-policy-watch/why-did-trump-end-wtos-appellate-body-tariffs

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