Trading Blows: Is the trade war between China and the US worth the fight?
September 5, 2019
2 min read
What's going on here?
As China has just filed the third report to the World Trade Organisation (WTO) against the US, the countries seem to be locked in a bitter trade war, with multi-dimensional collateral damage.
What does this mean?
On September 2nd, China lodged a complaint against the United States at the WTO.The WTO is an international organization that limits the tariffs each country is allowed to charge, and China has now reported to it for the third time during the presidency of Donald Trump.
Why is that? The US began imposing 15% tariffs on a variety of Chinese goods – in return, China imposed new duties on US crude oil, leading to a trade war. The US tariffs had a devastating effect on Chinese exports, affecting $300 billion worth of goods. Moreover, the latest tariff actions are considered a violation to the agreement reached by the leaders of China and the US.
Countering the Chinese rhetoric, US officials claim that they are penalising China for theft of intellectual property in technology and technology-transfer know-how of its trading partners, which is not covered by WTO rules. Furthermore, China’s decision to adopt an eye for an eye approach, by imposing tariffs on US goods without the WTO’s approval, was condemned.
According to the WTO rules, the US has 60 days to try to settle the latest dispute. Then China could ask the WTO to adjudicate, a process that would last several years.
What's the big picture effect?
Steve Lamar, executive vice president of the American Apparel & Footwear Association, said that the new tariffs are claimed to be “hurting China but, in reality, they are hurting us. Prices will go up, sales will go down, jobs will be lost”. Furthermore, the tariffs are estimated to cost US households up to $1,000, hitting a significant number of US consumer goods.
Despite the call for calm by many members of the business community, President Trump, writing on Twitter, declared that his goal is to reduce US reliance on China, urging US companies once again to find alternate suppliers outside of China.
Internationally, the US-China trade dispute has had a chilling effect on the world economy as global trade volumes plummet and major companies pause investments.
Concerning the UK, in the aftermath of the G7 meeting, the relationship between President Trump and Prime Minister Boris Johnson seems to be closer than ever. Nevertheless, the post-Brexit position of the UK amidst the trade war remains uncertain, as the UK alone is more vulnerable to the US using tariffs as leverage as it furthers its own trade policies.
Report written by Vasiliki Poula
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