USA China trade war

Top two economies of the world USA and China has entered into the battleground of a trade war. In March last year, USA President Donald Trump imposed heavy tariffs on imported aluminum and steel. In response, China imposed tariffs on billions of Dollar worth of American imports.

This imposition of heavy taxes lays its foundation from one of the USA Presidential election campaigns to fix China’s “long term abuse of the broken International system and unfair practices.”  In 2017, the US held an investigation into China’s trade policies. To make US- products cheaper than imported goods and to promote Consumers to buy American products these tariffs are imposed by the biggest export market for Chinese products.

According to BBC News, So far, The USA has imposed three rounds of tariffs on Chinese Goods, totaling more than $250 bn. The duties range from 10% to 25% and cover a wide range of industrial abs consumers from handbags to railway equipment. The US also has put a tariff on world-wide import of goods like steel and washing machines which further affects producers from China.

In retaliation, China has also played its move cleverly. China has targeted products including chemicals, coal and medical equipment with levies from 5% to 25%. It has strategically targeted products made in Republican district and goods that can be purchased somewhere like Soybeans.

After many months of animosity, both countries have agreed to hold off new trade tariffs for 90 days to allow for talks. To resolve their difference they have to impose a deadline that is by 1 March of this year. In failing to strike a deal the US has cleared its stand that it will increase tariff rates on $200bn worth of Chinese goods from 10% to 25%.

The UN Conference on Trade and Development (Unctad) has warned that there will be a hefty cost if a trade war continues. “The implications are going to be massive. There will be currency wars and devaluation, stagflation leading to job losses and higher unemployment and more importantly, the possibility of a contagion effect, or what we call a reactionary effect leading to a cascade of other trade distortionary measures.” Said Pamela Coke- Hamilton, Unctad’s head of international trade at a news conference. Adding to it, she emphasized that smaller poor countries would struggle to cope up with external shocks.

It is interesting to notice that according to UN research, a study shows that European exports will grow by $70 bn, while Japan, Canada, and Mexico will see exports increase by more than $20 bn each. India would also be one of the beneficiaries of this trade war.

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