Exchange of
capital, goods and services at an international level helps to connect several
parts of the globe, further helping in establishing interdependent economic
relations. However, economic imbalances can reflect inadequacy in import and
export activities. An economic conflict which results from extreme
protectionism between growing economies leading to imposition or increase in
tariffs or any other barriers against one another in response to trade barriers
can be referred as trade war.
The United
States-China trade War is an ongoing war between the People's Republic of China
and the United States of America characterized by increasing tariffs and other
measures since 2018 in order to retaliate against each other. Global economic
and technological dominance is the major cause of conflict between China and the
United States.
CAUSES OF EMERGING TRADE WAR
Several
disagreements preceded the trade war between the US and China. One such
explanation is that the cumulative trillions of dollars Americans transfer
overseas as a result of yearly deficits, are then used by those countries to
buy America's assets, as opposed to investing that money in the US.
Second area of
dispute is the allegations against China for stealing American intellectual
property and military technology along with adopting and enforcing policies. As
per the allegations, the US patent holders in Chinese markets were forced to
engage in joint ventures with Chinese companies, which in turn, gives Chinese
companies illicit access to their technologies.
For instance, multiple
US companies were not allowed to enter some business sectors, especially
automotive industry, unless a joint venture, majority-owned by a domestic
partner is established. In such ventures, the domestic Chinese companies gain an
access to use intellectual property from their foreign partner, so that they
can produce domestic products based on it. This was believed to be a violation
of WTO rules concerning fair treatment of domestic and foreign companies as the
leakage of intellectual property was important to be taken care of.
THE TRADE WAR “SAGA”
June 2016: While campaigning
for the White House at a rally in Pennsylvania Trump laid out his plans to
counter unfair trade practices from China.
March 2017: Donald Trump,
the president of U.S.A. signed two executive orders: one for tighter tariff
enforcement in anti-subsidy and anti-dumping trade cases and the other reviewed
U.S. trade deficits and their causes.
April 2017: Trump and
Chinese President Xi Jinping agreed to a 100-day plan for trade talks at their
first meeting.
July 2017: Both the sides
failed to agree on new steps to reduce the U.S. deficit with China after the
100 days of talks.
August 2017: Trump ordered “Section 301” probe into alleged Chinese intellectual
property theft, described as his first direct trade measure against Beijing.
Section 301 refers to the part of a 1974 trade law that lays out how the United
States should enforce its rights under trade agreements.
January 2018: Trump, in an
interview, threatened a big “fine” on China over alleged IP theft, without
providing details. Trump imposed tariffs on all imported washing machines and
solar panels - not just those from China.
March 2018: Trump ordered
25% tariffs on steel imports and 10% on aluminium from all suppliers - not just
China.
April 2018: China imposed
tariffs of up to 25% on 128 U.S. products. Trump unveiled his plans for 25%
tariffs on about $50 billion of Chinese imports. China responded with plans for
retaliatory tariffs on about $50 billion of U.S. imports.
June 2018: The United States
sets an effective date of July 6 for 25% levies on $34 billion of Chinese
imports. It said 25% tariffs will also kick in on an additional $16 billion of
goods after a public comment period. China responded in kind with tariffs on
$34 billion of U.S. goods.
July 2018: The United States unveiled its plans for 10% tariffs on $200 billion of
Chinese imports.
August 2018: Trump ordered
USTR to increase the tariffs on $200 billion of Chinese imports to 25% from the
originally proposed 10%. The United States released the list of $16 billion of
Chinese goods to be subject to 25% tariffs. China retaliates with 25% duties on
$16 billion of U.S. goods. Tariffs on goods appearing on the Aug. 7 lists from
both the United States and China take effect.
September 2018: Trump
threatened tariffs on $267 billion more of Chinese imports. The United States
implemented 10% tariffs on $200 billion of Chinese imports. The administration
said the rate will increase to 25% on Jan. 1, 2019. China answers with duties
of its own on $60 billion of U.S. goods.
December 2018: The United
States and China agreed on a 90-day halt to new tariffs. Trump agreed to put
off the Jan. 1 scheduled increase on tariffs on $200 billion of Chinese goods
until early March while talks between the two countries took place. China
agreed to buy a “very substantial” amount of U.S. products.
February 2019: Trump
extended the March 1 deadline, leaving the tariffs on $200 billion of Chinese
goods at 10% on an open-ended basis.
May 2019: Trump tweeted that
he intended to raise the tariffs rate on $200 billion of Chinese goods to 25%
on May 10. The Trump administration gave formal notice of its intent to raise
tariffs on $200 billion of Chinese imports to 25% from 10%, effective May 10.
June 2019: Trump and Xi
speak by phone, and the two sides agree to rekindle trade talks ahead of a
planned meeting between the two leaders scheduled for the Group of 20 (G20)
summit in Japan at the end of June. At the G20 meeting in Osaka, the United
States and China formally agreed to restart trade talks after concessions from
both sides. Trump agreed to no new tariffs and an easing of restrictions on
Chinese telecom powerhouse Huawei Technologies Co Ltd. China agreed to
unspecified new purchases of U.S. farm products.
IMPORTED AND
EXPORTED PRODUCTS BETWEEN US AND CHINA

IMPACT OF TRADE WAR
Some of the
industries will be affected badly, if this full-blown trade war between China
and the United States becomes a reality. Sectors like Automobiles, Information Technology
and Agriculture are likely to be the most susceptible to the impact of trade
war.
AUTOMOBILES
The United
States automotive industry is one of the biggest sectors which is witnessing high
loss due to trade tensions between China and the United States. In 2018, China raised
the tariff on the US made automobiles, from 15% to 40%, in vengeance to the US
tariffs. Usually, the Chinese consumers prefer buying automobiles that are
manufactured locally, therefore, by imposing such tariff it is the US automakers,
like Tesla Inc. (TSLA), would bear the burden.
According to
TechSci research report, “China
Automotive Acoustic Engineering Services Market, By Vehicle Type
(Light-Duty Vehicles, Heavy-Duty Vehicles and Electric & Hybrid Vehicles),
By Application (Drivetrain, Powertrain and Others), By Software (Calibration,
Signal Analysis and Others), By Drive Type (Front Wheel Drive and Others), By
Offering (Physical Acoustic Testing and Others), By Process (Design,
Development and Testing), By Company and By Geography, Forecast &
Opportunities, 2024”, China Automotive Acoustic Engineering Services Market size is
predicted to grow at a formidable pace during the forecast period. The Chinese
market for automotive acoustic engineering services is majorly growing due to
the rising demand for cabin comfort in vehicles. Also, the introduction of
stringent regulatory norms related to the vehicle noise for the internal
combustion engine (ICE) is bolstering the Chinese market for automotive acoustic
engineering services. In terms of application, the market for China automotive
acoustic engineering services is categorized into Drivetrain, Powertrain, Body
& Structure, Interior and others. Owing to the increasing demand for silent
cabins and enhanced comfort, the interior category is predicted to witness the
fastest growth during the forecast period in the Chinese market for automotive
acoustic engineering. Among regions, the Eastern region of the country is
anticipated to account for a good portion of the market during the forecast
period. Some of the major players in China automotive acoustic engineering
services market are Schaeffler Group, Infosys Limited, Continental AG among
others.
INFORMATION TECHNOLOGY
NVIDIA Corp.
(NVDA), Micron Technology (MU) and Intel Corp. (INTC) companies are the most
vulnerable in this trade war as these chipmakers and electronics manufacturers
rely on China for sales.
Also, Apple Inc.
(AAPL) is so vulnerable to a trade war with China owing to two primary reasons.
First, the phones are getting assembled in China. The company so far has been
able to deal with tariffs on its China-assembled phones but with the announcement
of new round of tariffs placed on Chinese exports it is possible that some of
Apple’s products could get caught in the crossfire making it volatile to price increase.
Another reason
is that, China accounts for 20% of Apple’s revenue generated. Apple, on
contrary to the other tech companies, sells its products to Chinese consumers to
make a substantial amount of money.
Therefore, Apple has never been in a favor of Trump’s proposed tariffs and does
not support implementing taxes on China imports.
AGRICULTURE
China is marked
as the fourth biggest agricultural exporter for the United States with a total
of USD9.3 billion export in 2018. Furthermore,
China has been the largest importer of the US soybeans. Other agricultural
products such as cotton, hides & skins, coarse grains and pork & pork
products are also exported to China in large amounts.
In retaliation
to the US tariffs, Chinese officials imposed an added tariff on the US soybeans
in 2018 due to which the American soybean farmers couldn’t sell their huge stockpiles
of product and suffered a loss of million dollars in the same year. In
addition, cotton is another trade-sensitive agricultural product, which
countries like India and Brazil are providing to China in order to meet their
needs.
The farmers and
related industries will be bearing the brunt of the trade war, if China slows
down or stops its purchases of agricultural products from the United States
again in the future.
TOURISM
Chinese tourists
are paramount for the US as the China remains at top in generating revenues from
travel. For the US, the Chinese Tourists make up the 3rd largest
travel and tourism market with an average of USD5,800 per visit which is
comparatively more than any other nationality.
This trade war
with China is adversely influencing the Chinese tourism in the US. As a result,
the country witnessed a decline of nearly 2
million Chinese visitors owing to rising currency exchange rates and hostile
trade relations between the two powerful economies.
WHO IS WINNING, WHO IS LOSING?
According to the
current trade scenario, the US-China trade war will leave both countries worse
off in the coming years. As per the current analysis, the prices for the American
consumers and producers who are importing intermediate inputs from China will
be hiked owing to the United States tariffs, while the Chinese tariffs will
disrupt the US exporters and producers supply chain. In the coming years, it is
anticipated that the US and China will divert trade to other markets to meet
their requirements, and on the other hand the other countries will divert
exports to China and US markets to reap the benefit from the growing dispute. As
a result of this trade war, the US agriculture and manufacturing sectors are
anticipated to witness downfall, while the Chinese manufacturing sector would experience
upsurge, leading growth in production and trade. Moreover, the US exporting to
other economies instead of China is partially hampering the overall economy of
the country. On the contrary, China is ahead at diverting exports to other countries
therefore, expanding its total exports. Additionally, small improvement in
Chinese GDP and a slight decline in the US GDP is analyzed based on direct and
indirect effects of trade tension with a marginal decline in global trade.
The ripples of
the trade war are impacting various countries in different manner, as the trade
conflict continues, winners and losers are beginning to emerge and create uncertainty
worldwide. The global supply chain is completely distorted as a result of the
trade war. Distributors are adjusting their ways of buying and selling of goods,
as a result of which, the countries like Vietnam, India, among others are
benefitting. The US is importing 40 per cent more from Vietnam leading to
increased investment. Despite Vietnam’s success, the European Union majorly
along with other third-party economies are dealing with the impact of ongoing
trade war. The European economy relies on trade for economic growth, and the
recent slowdown in trade due to the US-China conflict has raised concerns about
future growth. Countries like Germany, among others are getting affected to a
greater extent as a result of this ongoing conflict. Despite having only
one-quarter of the population size, Germany produces nearly the same value of
exports as the US. Moreover, downfall in demand from the US due to trade
conflicts is not good for Germany. On the other side, Germany has a long
history of doing business in China, and exports to the Asian giant have
increased in the last two decades. However, if China’s trade activity declines,
Germany will lose a massive export market.
The global
economic growth is likely to get subdued due to the ongoing US China trade war.
The war poses a threat of damage to other growing economies as well. China
imposed higher tariffs on the US goods worth USD60 billion in retribution
against Washington’s tariff hike on Chinese goods. This trade tension could be
a golden opportunity for India if it is for short duration. Otherwise, if this
war persists for long there will be a downfall in the Indian economy as well.
India is among few growing countries which will be benefited from this dispute
of world’s two top economies. While the Chinese products are being taxed with
heavy duties in the US, India exporters can explore this opportunity to fill
the void.
For instance,
the Chinese carpets can be replaced by Indian carpets, in the US market on
account of higher tariffs along with the retaliatory tariffs for a long list of
products exported from China. By replacing Chinese carpets, the Indian
manufacturers can reap profits to an extent owing to high price of Chinese
carpets due to this tariff war. Thus, carpet exporters are looking at more
business opportunities from the ongoing US-China tariff war. Not only carpet
exporters, Indian tire manufacturers have also suddenly found their products
becoming more cost-competitive than before on account of increased tariffs on
Chinese radial tires by the United States, that are used in buses and trucks.
Furthermore, India's
processed food exporters are trying to reach out to the US retail chains like
Walmart and Costco, while Indian pharmaceutical companies, especially raw
material suppliers are seeking to fill in the space. A whole range of rubber
items, such as hoses, pipes, rubber mats from India are likely to become more
attractive for the US importers. Additionally, other Indian industries, which
include apparels and textiles, leather products, machine tools, processed foods
such as jams, marmalades and jellies, are also witnessing growth as the imports
of these products from China have become more expensive due to higher tariff in
the US.
RECENT
DEVELOPMENTS
In August 2019
President Trump has announced that the US will impose a 10 per cent tariff on essentially
all Chinese goods which were not previously subjected to tariffs from 1st of September. These tariffs will be considered as
the List 4 tariffs and will hit about USD300 billion worth of imports from
China. If this tariff is implemented, then nearly all products that are
imported from China will be subjected to tariffs. China for the first time has
allowed the yuan to weaken to more than 7 RMB per dollar since the global
financial crisis. In fact, in previous years they have burned a substantial portion
of their foreign reserves to defend the currency from breaching that mark.
Additionally, the Chinese government has instructed few companies to stop
buying the US agricultural products. The US President Donald Trump announced an
additional duty on USD550 billion of targeted Chinese goods, few hours after
China unveiled retaliatory tariffs on USD75 billion worth of US goods.
According to
TechSci research, “Global
Duplex Stainless Steel Market By Grade (Duplex, Lean Duplex and
Super & Hyper Duplex), By Product Form (Tubes, Pumps & Valves, Fittings
& Flanges, Welding Wires, Rebar & Mesh and Others), By End Use
Industry, By Region, Competition, Forecast & Opportunities, 2024”,
the global stainless steel market is expected to
grow at a steady rate owing to the corrosion resistance, tensile strength and
durability of duplex stainless steel. Duplex stainless steel is twice as strong
as the ferric stainless steel and regular austenitic steels. Duplex
stainless-steel offers excellence resistance to corrosion and high mechanical
strength ensuring more uptime than carbon steels and conventional steels.
Moreover, increasing demand for duplex stainless steel from various end-use
industries, such as chemical, oil & gas, pulp & paper, desalination,
energy and construction is likely to drive the demand for duplex stainless
steel during the forecast period.
