US-China trade war: a layman look
The US-China trade war is an illusion, not the reality. It is reality because the ripples of its impacts are felt across. It is the finest manifestation of the illusion of reality that we have observed in several decades. The situation is likely to worsen further not because of the leadership failure on negotiations but because of the real intentions behind this trade tussle.
The global leaders are hoping to get this better and fix when Trump and Xi meet for G20 summit later this month. The hopes are futile. It looks more likely that the trade war will be long, messy—and expensive.
Can we call it the second cold war – possibly! Yet, not necessarily of same nature.
According to Bloomberg, if tariffs expand to cover all U.S.-China trade, and markets slump in response, global GDP will take a $600 billion hit in 2021, the year of peak impact.
Chinese are endeavouring for more realistic and softer approach to the war only because the loss from the trade debacles will be most devastating to its economy compared to the loss US will have. The US is the largest trade partner of China. According to US Census, China imported goods worth USD120.3 billion from the US while exported USD539.5 billion to the US in 2018.
Chinese goods now dominate the US products in the American market. The high cost of production forced US companies to outsource manufacturing into China that not only exported employment to China but copyrights too. China failed to clamp on copyright infringements, which has been the rising concern for many western countries.
Lets look at history. The Agriculture Tariff War of 1930, the Chicken Tariff War of 1960s, the Lumber Way of 1982, the Banana Tariff War of 1993 and the Steel Tariff War of 2002 are some of the representative trade wars that US initiated to improve its economic and political representation at the world stage. In most cases, US benefitted. The trade war with Japan in 1987 has many resembles to today’s war with China.
The US was loosing its economic strength due to high trade deficit to Japan primarily – Japanese exporting electronics and motor parts in huge volumes. The US saw Japan to be a threat to its economic dominance and imposed sanctions and restrictions. Japan conceded and its impact continues today in that country – the Japanese economy not improving proportionately since then and national debt rising to almost 150% of the GDP.
It remains to see if China bows to follow Japan’s suit.
The global impact of the US-China trade war is tantamount. Over 70% of the China originated goods are in fact produced in other South and South East Asian countries and assembled in China. Reduced export from China directly affects these producers and their economy. The impacts have already been felt. Better days are history.
Whatever is the weapon of war, the motive is political and economic dominance. The US was in panic for over a decade – looking at the pace China was rising to economic dominance. The US debt surpassing its GDP due to unexpected costs in the wars in Afghanistan, Iraq and other Middle East countries shows little hope of growth to repair the damaged caused the 2007-08 recession. On the other hand, the Chinese economic growth remains unstoppable. With such rise, China has encircled the Asian and African countries through economic diplomacy.
Without such mischievous motive, we hardly can image for the US to advocate for protectionism while conservative communist China favouring free trade.
China poised to be the next economic powerhouse, is seeking its sphere of dominance. The smaller countries are certain to fall prey to this illusive war of power-hungry stupid politicians. Political leaders and their business sponsors fight the war and still remain unaffected. The ultimate result is to snatch survival capacity of layman.