What is happening to
U.S.-China trade?
In the latest round of
tit-for-tat, China, on
Wednesday, announced plans to hike
tariffs by 25% on 106 imports from the U.S. The Chinese move was in response to
a U.S. announcement on Tuesday, of a 25% tariff on 1,333 Chinese imports.
The proposed U.S. tariffs are the result of the administration’s investigation
into whether China has been indulging in unfair
intellectual property and technology transfer practices under a “Made in China
2025” industrial promotion policy. If implemented, China’s retaliatory
tariffs, on products such as soybean, whisky, orange juice and cars, would hit
the U.S. where it hurts; 60% of U.S. soybean exports go to China.
The tariffs imposed by China are
expected to hit $50 billion of trade — similar in value to the Chinese goods
targeted by the U.S. tariffs proposed on Tuesday in high technology sectors
including aerospace, robotics and communications.
How did this start?
The proximate cause for this
tit-for-tat goes back to early March
when U.S. President Donald Trump announced tariffs of 25% and 10% on imports of
steel and aluminium, respectively, using “national security” provisions of
U.S. trade law. However, even during his presidential campaign, Mr. Trump had
alleged unfair practices by the U.S.’s trade partners, singling out China in
this context and the trade imbalance between the two countries.
It is likely that the steel tariff
announcement was strategically timed for a few days before a special election
for a Pennsylvania Congressional district (eventually won by the Democratic
candidate), home to steelworkers, and who form a significant part of Mr.
Trump’s support base. As the producer of
half the world’s steel, China has in the past been accused of dumping cheap steel on international markets by
others, including India and the European Union. Most of China’s steel is
sent to Asian markets, not to the U.S. China responded on Monday by imposing
tariffs on 128 goods, worth $3 billion (₹19,500
crore) in trade value, a milder response compared to the second round of
tariffs announced on Wednesday.
Where is this heading?
As this went to press, neither
the U.S. nor China had announced kick-off dates for the harsher round of
tariffs. Hitting Chinese manufactures in high-technology sectors could hurt
U.S. businesses that have plants in China, where labour and manufacturing costs
are lower. Several of these have lodged objections with the White House and the
U.S. is expected to hold consultations before confirming these tariffs. China’s
tariffs have also targeted products that are sourced from states that supported
Mr. Trump or where Republican lawmakers will soon face elections. There appears to be room for negotiation
and discussion before a trade war erupts.
Credit: The Hindu Explains
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