US China Trade War

US-China-Trade-War

Trade is one of the activities in the world rooted in prehistoric era when people used to exchange goods against goods as money was not involved. With the passage of time, the trade system evolved to an extent that it was in full swing during colonialism. Colonialism era constituted well organized structure of trade but it was confined to respective colonies. A brief history is to be kept in mind before we discuss US China Trade War. The colonial powers did trade with the respective states under their control, they imported raw material to home state, produce commodities and export them towards occupied areas. An interesting fact about this era was the use of military power and strong navies were the guarantee of strong economies because railway networks were not much developed neither they connected far reaching islands and regions. The colonial powers use excessive military force and capture resources which implies military was the mean to an end, a strong economy.

The next step was the establishment of economic order which was termed as Mercantilism. It is the approach towards economy to make it strong while denying others to do so. By this approach, unlike today, there was very little trade among colonial powers fearing other might achieve more economic gains. Another important thing to point out is the intention of making economies strong, strong military. These two used to complement each other for excessive gains.

After WW II, this economic order was collapsed and liberal economic order was introduced by the US which sought free trade areas, tariffs free bilateral trade and extra regional trade to contribute in making global economy. The US lead states to open borders for trade in true sense. But under Trump Administration, the world has observed negative approach towards trends set by the US. The US started folding those carpets which it unfold at the end of WW II. Another worth considering fact about liberal economic world order is capitalistic growth which by means widens the gap between the rich and poor.

The US economic tension with China is widely portrayed as a War. War implies full scale military operations against enemy but this is economic in terms. With the evolution of the concept of warfare, it is said that war is anything that inflicts damage to the enemy. The US make economy a means to achieve an end, Chinese negative economic growth. This is the pivotal point around which the conflict revolves. By relating it to the facts mentioned above, it is the ways which are changes and rest of the game is already practiced widely in history. It is to be pointed out that the US resort to economic means to confront economic opponent, a major shift in traditional confrontation. It would be appropriate to highlight that the economy in 21st century is more political than traditional mode. Thus the US would use economic manoeuvres to gain political ends. It is safely to assume that in past, military and economy used to complement each other, in modern era, economy and politics complement each other while military behaves like a muscle show off.

There are some startling facts which best defines their bilateral trade volume, their bilateral trade deficit, and likely repercussions for political economy. Astonishing, President Trump put 10 % tariffs on $200 billion Chinese goods comprising furniture and electronic appliances which would be increased by 25 % till January 2019. In response, China did not went quiet and retaliated with imposition of tariffs on 5,207 goods worth $60 billion. This is the direct confrontation between two economic giants while there are some indirect measures to sanction other states.

Countering America’s Adversaries Through Sanctions ACT (CAATSA) is an act which was introduced by 115th congress which initially sought sanctions against Iran and North Korea while later it was extended to Russia and then China. In September 2018, along with economic sanctions and tariffs, US sanctioned Chinese Ministry of Defence arms procurement body because it sought the purchase of S-400, an air defence missile system, and SU-35, a multi role fighter jet. By enforcing CAATSA, the US justifies saying it intends to sanction Russia, not China but China would be effected if the deal is not to be realized. As the result of these sanctions, Chinese state media Xinhua termed the US policies as Trade Bullyism. Furthermore, the US invited Chinese counter parts to renegotiate trade and economic policies which is declined by China. Both of the states are rapidly entering in a phase quoted “Squarely in the midst of the It’ll get worse before it gets better.

The US officials define the scenario in an interesting way saying the US intends to bring China on terms to achieve zero tariffs, free trade and zero subsides on both sides what China said dubious intentions, at least from steps taken by the US. On both sides, thousands of companies have asked their governments to remove tariffs from certain goods but in vain which is likely to initiate global trade crisis. If continues to complicate, small business structure would collapse and corporate industries would raise prices for their goods making un-affordable and inflation will follow. A very few people of you would have known that any commodity is not manufactured in one market of a state rather its parts are manufactured by different entities and assembled at another location, say thanks to innovation and connectivity. In this way, all contributing producers of a single commodity would be potentially effected by trade bullyism.

This is true, there is huge trade deficit worth $46 billion but it is not likely to be overcome by imposition of tariffs, at least history does not suggest so. But interestingly, the US intends to restructure other global economic organizations to its favor and disfavor to opponents, a double standard policy which will bring nothing but economic disaster. This must be end soon.

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