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IN DEPTH: US AND China. Urgent Need to Compromise on Trade
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US AND China: Urgent Need to Compromise on Trade
By Shokhi

BT 201811 In depth 01美国和中国:急需贸易妥协

关税是对进口产品征收的税,以便在价格上涨时减少消费。对于国际收支,一些国家征收重税,以平衡进出口。引入关税的另一个原因是促进当地产业发挥作用。如果对进口商品征收重税,那么各国更有可能生产自己的产品,而不是从其他国家购买。减轻国内产业竞争的外国卖家是对进口产品征收关税的另一个重要原因。

美中贸易战于2018年4月早些时候开始,特朗普总统对从中国进口的钢铁和铝征收25%的关税。中国对从美国进口的产品征收高额关税进行报复。美国不仅对中国商品征收高额关税,而且还对加拿大以及欧盟国家的贸易商品征收关税。 2018年7月,美国对从中国进口的价值340亿美元的商品征收25%的关税。

中国可能是唯一一个与美国打击相冲突的国家,但它绝不是唯一受到特朗普关税打击的国家。 特朗普总统还对欧盟,加拿大和墨西哥的产品征收了极高的关税。

可能这场贸易冲突结束的唯一途径是通过基于公平,相互尊重和正直的适当谈判和协商。 白宫经济顾问拉里•库德洛也声称美国愿意与中国谈判。 但这两个国家似乎都没有对解决冲突特别感兴趣。

A tariff is a tax levied on import products to reduce their consumption as their prices rise. For the balance of payments, some countries impose heavy trade taxes to balance imports and exports. Another reason to introduce tariffs is to urge the local industry to perform. If there are heavy taxes imposed on imported goods, then countries are more likely to produce their own products instead of purchasing them from other countries. Relieving the domestic industry of competition from foreign sellers is another very important reason why tariffs are imposed on imported products.
 

The US-China trade war started earlier in April 2018 when President Donald Trump imposed 25% tariffs on steel and aluminum imported from China. China retaliated by imposing heavy duties on the products that it imported from the USA. The US has not only levied heavy tariffs on Chinese goods, but it has also introduced tariffs for traded goods from Canada as well as countries in the European Union. In July 2018, the US imposed 25% tariffs on $34 billion worth of goods imported from China, and China responded similarly by imposing huge tariffs on goods imported from the US.
 

A few days later, President Trump had the Office of US Trade Representative (USTR) to publish a list of $200 billion worth of Chinese goods to be subjected to a 10% tariff. China responded by calling these tariffs “irrational” and “completely unacceptable.” The Trump administration responded by claiming that these tariffs are necessary to reduce the trade deficit between China and the US and for the protection of intellectual property and national security.

BT 201811 In depth 02The next round of tariffs imported by the US on $200 billion worth of Chinese goods is to arrive as soon as next week, and China is not happy. They are set to retaliate and impose heavy duties on all things imported from the US. The US tariffs started at a rate of 10% before they caught an airplane straight to a daunting rate of 25% towards the end of this year. They will have come into effect on September 24th, and China has announced to hit about 5,000 US goods with 5-10% tariffs applicable from the exact same date.
 

As nice as the ping-pong battle between the world’s largest two economies is, it’s getting tiring, not to mention very deficient for trading companies on both sides of the Pacific. The clash between the US and China has already hurt a lot of companies and is bound to hurt more since neither looks ready to stand down or resolve this conflict just yet. The trade war just keeps on escalating as both sides announce their biggest tariff margins to date. The latest trade taxes imposed by the US mean that about half of Chinese products imported by the US will be delivered with heavy tariffs each fiscal year.
 

Economists and trade markets all over the world are condemning President Trump’s trade moves to which he replies with, “We’re doing a very good job with China,” and continues to say, “China has been taking advantage of the United States for a long time, and that’s not happening anymore,” he concludes at the Oval Office.
 

The entire purpose of President Trump’s administration is to try and pressure China to change its industrial policies. President Trump accuses China of the theft of US intellectual property and boosting its own industry through aggressive policies. China dismisses all accusations as groundless criticism but it has been accused of such tactics before by the American and European firms that operate in China.
 

How Does the US-China Trade War Affect the Global Economy?

China might have been the only country to match steps with the US blow for blow, but it is definitely not the only the country that has been hit with Trump’s tariffs. President Trump has also slapped the European Union, Canada, and Mexico with outrageous tariff imposition on their products.
 

Word is that he is looking into imposing Tariffs on US’s imports of cars and auto parts. If it comes to that, these tariffs are sure to wreak havoc on the European auto industry. And this includes the UK, irrespective of the Brexit.
 

If this happens, retaliation is a given. And this retaliation will undoubtedly turn into a global trade war. According to The Bank of England, a full-blown global trade war is the only way Trump’s policies are headed. And if that happens, the global GDP will suffer by a 2.5% loss in a span of just three years. Further simulations show that the US would consequently suffer the most with a 5% blow to its economic growth.

BT 201811 In depth 03These reasons only bring us to the inevitable conclusion that this back and forth game of hitting each other with tariffs has to stop. It’s not only affecting China and the US, but the global economy will suffer the collateral damage as repercussions of their trade war hit in full force. Since the US and China make up the majority of the trade industry of the world, the damage caused by either, let alone both, will be massive.
 

China’s Next Move

The White House was quick to announce that any further retaliation from Beijing would result in further tariffs on about $267 billion of Chinese exports to the US. That covers all of the goods China sells to the US market. Now China could retaliate and take this a step ahead, but the problem is China doesn’t import half as much from the US as the US does from China. This means that the US has a comparatively larger stock to levy its tariffs on. Now China will try alternative tactics to match the US dollar-for-dollar in this battle. Analysts and economists have predicted that once China runs out of US products to hit with its round of tariffs, it will go after US-based companies that operate in China. That would be a dirty trick, if not for China’s unfailing track record that precedes them which makes this a very stark possibility. China’s next move may be to go after companies like Apple and Boeing. China has been accused of such behavior before when it made South Korean firms miserable due to its political conflict with the South Korean government last year.
 

US-based companies that work in China have already been complaining of increased hurdles in business undoubtedly created by the Chinese government. There have been various custom delays and inspections, but whether or not China will continue this aggressive approach by encouraging consumer boycott of US products still remains a mystery. These methods, on one hand, will make Beijing a nightmare for foreign companies to do business and firms will look into moving their business out of China. On the other hand, they get to score another point against the US. To sum it all up, neither China nor the US is above using dirty tactics to get the upper hand and blow this trade war out of proportion. And this is alarming because the effects of this trade war will cause damage to industries everywhere. Both countries need to come to a compromise and conclude this war before it causes more damage than it already has.
 

The Chinese have stressed repeatedly that the only way this trade conflict could end is through proper talks and consultations based on equity, mutual respect, and integrity, as per the words of Chinese spokesman Geng Shuang. The White House economic adviser, Larry Kudlow, also claims that the United States is willing to negotiate with China. But neither of the two countries seems particularly interested in resolving the conflict.
 

Arthur Kroeber, a senior analyst at the research firm, Gavekal sums up the entire fiasco pretty well in his note on Tuesday. He says, “The principal objective of the tariffs is probably not to bring Beijing to the bargaining table,” then continues, “rather, it is to force US multinational companies to pull back their investments in China, so that the interdependence of two rival economies is reduced.”
 

He concludes by saying, “Against this aim, no possible offer by China can cause the tariffs to be lifted.”

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