20 Mar 2019

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US China trade conflict

Donald Trump’s announcement of tariffs on $60bn worth of Chinese imports has raised the prospect of a trade war that threatens to violently shake both economies.

Economists think that Trump’s sanctions would shake the global economy and create problems for the Chinese and American consumers. According to the American Apparel & Footwear Association US imports more than 41% of clothing and 72% of footwear from China.

China is a major market for US agricultural products, cars and machinery. Trump has asked the Chinese to cut the trade deficit by $100 billion – a demand unlikely to be granted to the US. The trade deficit between US-China has soared to $375 billion last year.  In 2016, China was the third largest market for US exports.

The US is expected to slap tariffs on Chinese products based on the Section 301 investigation on more than 1,000 products. The Chinese government has asked the US to negotiate and avoid a trade war. The imposition of tariffs also violated the WTO rules and the reciprocity principle.

China has prepared its own list to hit back at the US. China is also contemplating imposing a ban on import of US plastics, paper and other junk products which are recycled in China. US sells used plastic and junk worth 6 billion dollars annually. A ban on US agriculture products will hit the US farmers and cheap products will disappear from US markets.

There are deep-seated reasons for a trade imbalance between China and the US. According to the Chinese experts, it is the result of a global labour division and cannot be changed with sanctions. It’s a delusion for Washington to request that China cut the trade surplus by $100 billion.

The US will be derided in history for using outdated policies to address the issues of the world’s largest two-way trade. China’s extensive retaliation will add to the economic chaos that the US government and consumer will not like. The Chinese administration is in no mood to bow to US policies and will retaliate with full force shaking the US economy.

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