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August 26, 2019

What’s China-US trade war and how it started?

National

August 26, 2019

LAHORE: Although the trade war between the United States of America and China is intensifying with every passing day, with no resolution in sight, the two nations still have a mammoth bilateral trade volume of US$737.1 billion.

The trade war has caused a significant deterioration in the US-China ties, as the countries have gone on to exchange tit-for-tat tariffs for over a year.

Just recently, on August 13, the US had announced it would impose tariffs on Chinese goods worth $111 billion on September 1, 2019, which thereby means that overall, Chinese products worth $361 billion will be facing the American wrath through new tariffs. And more Chinese products, carrying a worth of $156 billion, will be facing additional American tariffs with effect from December 15 this year. It was also on August 23 this year that American courier services were ordered to begin searching and refusing delivery on all suspicious US-bound shipments that may contain Fentanyl, a medication for anesthesia. Fentanyl is also used as a recreational drug, often mixed with heroin or cocaine. Following this announcement, the Dow Jones Index had dropped 800 points on August 14, 2019, plummeting due to Trump administration’s continuous frustration and anger over the growing American trade imbalance with China. However, the stock market recovered some of the lost ground in the days that followed. But the recovery was short-lived, and on August 23, US President Trump had literally made his country’s stock market nosedive within minutes of his tweets, four of them altogether. Trump’s strongly-worded tweets had vehemently attacked China and the US Federal Reserve Chairman Jerome Powell. The American head of state had “ordered” American companies to immediately seek alternatives to doing business in China; and the Dow was down 623 points for the day. Here follows a complete text of Trump’s tweets:

“Our country has lost, stupidly, trillions of dollars with China over many years. They have stolen our intellectual property at a rate of hundreds of billions of dollars a year & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must stop. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies home and making your products in the USA. “I will be responding to China’s tariffs this afternoon. This is a great opportunity for the United States. Also, I am ordering all carriers, including Fed Ex, Amazon, UPS and the Post Office, to search and refuse all deliveries of Fentanyl from China (or anywhere else!). Fentanyl kills 100,000 Americans a year. President Xi said this would stop - it didn’t. Our economy, because of our gains in the last 2 1/2 years, is much larger than that of China. We will keep it that way!” He had even typed a few words in capital letters to lay greater emphasis. Trump’s Twitter rant was a reaction to China’s announcement of retaliatory tariffs worth $75 billion on American goods. And last Friday, the Dow was down 431 points within a few hours. Research tells us that some 30 years before becoming president, Donald Trump had frequently vouched for the imposition of tariffs to reduce America’s trade imbalance and revive manufacturing, asserting the country was being “ripped off” by its trading partners, and imposing tariffs was a major plank of his presidential campaign. (References: The CNNMoney and the New York Times).

Compiled with the help of news items appearing in various reputed global outlets like the Washington Post, Bloomberg, CNBC, The Guardian, BBC, Associated Press, CNN, New York Times, Reuters, and the Forbes magazine etc, here follows a brief chronology of US-China trade war that has gained more heat during Trump’s regime:

On March 22, 2018, Trump asked his government to investigate applying tariffs on US$50–60 billion worth of Chinese goods. He had stated that the proposed tariffs were “a response to the unfair trade practices of China over the years” including theft of US intellectual property. Over 1,300 categories of Chinese imports were listed for tariffs, including aircraft parts, batteries, flat-panel televisions, medical devices, satellites and various weapons. On April 2, 2018, China had responded by imposing tariffs on 128 products it imports from America, including aluminum, airplanes, cars, pork, soybeans, fruit, nuts and steel piping etc. On April 4, 2018 Trump denied the existence of a trade war, saying “that war was lost many years ago by the foolish, or incompetent, people who represented the United States. He was quoted as saying: “Now we have a trade deficit of $500 billion a year, with intellectual property theft of another $300 billion. We cannot let this continue”. On April 5, 2018, Trump said he was considering another round of tariffs on an additional $100 billion of Chinese imports as Beijing retaliates. The next day, the World Trade Organisation (WTO) had received request from China for consultations on new US tariffs. On May 20, 2018, Chinese officials had agreed to “substantially reduce” America’s trade deficit with China by committing to “significantly increase” its purchases of American goods.

On May 29, 2018, the White House announced that it would impose a 25 per cent tariff on $50 billion of Chinese goods with “industrially significant technology”; the full list of products affected to be announced by June 15, 2018. China reacted by asserting it would discontinue trade talks with Washington if it imposed trade sanctions. On June 15, 2018, Trump had declared that the United States would impose a 25 per cent tariff on $50 billion of Chinese exports; $34 billion would start July 6, 2018, with a further $16 billion to begin at a later date.

Visibly infuriated over this American decision, China’s commerce ministry accused the United States of launching a trade war and said China would respond in kind with similar tariffs on the US imports, starting on July 6, 2018. Three days later, the White House declared that the United States would impose additional 10 per cent tariffs on another $200 billion worth of Chinese imports if China retaliated against these US tariffs. The list of products included in this round of tariffs was released on July 11, 2018, and was set to be implemented within 60 days. On June 19, 2018, China retaliated, and threatened the US that it would slap its own tariffs on $50 billion of the US goods, adding that the United States had launched a trade war. On July 6, 2018, American tariffs on $34 billion of Chinese goods came into effect. China imposed retaliatory tariffs on US goods of a similar value. On July 10, 2018, the US released an initial list of the additional $200 billion of Chinese goods that would be subject to a 10 per cent tariff. Within 48 hours, China vowed to retaliate with additional tariffs on American goods worth $60 billion annually. On August 8, 2018, the US government published its final list of 279 Chinese goods, worth $16 billion, to be subject to a 25 per cent tariff from August 23, 2018.

In response, China imposed 25 per cent tariffs on $16 billion of imports from the US, which was implemented in parallel with the US tariffs on August 23, 2018. On August 14, 2018, China filed a complaint with the WTO, stating that US tariffs on foreign solar panels clashed with its (WTO) ruling, arguing they had destabilised the international market for solar PV products. On August 23, 2018, the US and China’s promised tariffs on $16 billion of goods took effect on August 27, 2018; China filed a new WTO complaint against the US regarding the additional tariffs. On September 17, 2018, the US announced its 10 per cent tariff on $200 billion worth of Chinese goods. Washington also threatened tariffs on an additional $267 billion worth of imports if China retaliated. On September 18, China imposed 10 per cent tariffs on $60 billion of US imports.

On November 10, 2018, the US alleged that a group of Wall Street billionaires were conducting an influence operation on behalf of the Chinese government by weakening the president and the US negotiating position. On December 1, 2018, the White House stated that both parties will “immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft”. On May 5, 2019, President Trump had stated that the previous tariffs of 10 per cent levied on $200 billion worth of Chinese goods would be raised to 25 per cent on May 10. On May 15, 2019, Trump signed executive order number 13873, which sought to restrict the export of US information and communications technology to “foreign adversaries” under national security grounds. This order was probably meant to support the American allegations of espionage via Chinese telecommunications firms. On June 1, 2019, China said it would raise tariffs on $60 billion worth of US goods. On June 29, 2019, during the G20 Osaka Summit, Trump announced he and his Chinese counterpart Xi Jinping have agreed to a “truce” in the trade war after extensive talks. Trump had maintained he would allow American companies to sell their products to Chinese technology giant Messrs Huawei that has a net income of US$8.656 billion, but the company would remain on the US trade blacklist. In July 2019, the IMF had found the Chinese Yuan to be correctly valued, while the dollar was overvalued. On August 1, 2019, Trump announced on Twitter that additional 10 per cent tariff would be levied on the “remaining $300 billion of goods”. On August 5, 2019, the US Department of Treasury officially declared China as a “currency manipulator”. The same day, China had ordered state-owned enterprises to stop buying US agricultural products totaling $20 billion per year before the trade war and $20 billion per year as of July 2019. On August 9, 2019, China had announced an accelerated decrease in holdings of US treasury holdings, targeting 25 per cent of its current holdings of $1.1 trillion. The August 13, 2019 development has been mentioned in the introductory paragraphs of this story as Trump administration had announced it would impose tariffs on Chinese goods worth $111 billion on September 1, 2019. Or in other words, Chinese products worth $361 billion overall will be facing the American tariffs in less than a week from now. And more Chinese products, carrying a worth of $156 billion- as stated above - will be facing additional tariffs with effect from December 15 this year. On August 23, 2019, the Chinese finance ministry announced new rounds of retaliatory tariffs on $75 billion worth of US goods, effective from September 1, 2019.

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