BUSINESS ENVIRONMENT PROJECT

-Guided by: prof. PRANJALI UNKULE

TOPIC: Impact of US China Trade War

KUMAR SHUBHAM
ROLL NO. -20204409
SECTION – B
  INTRODUCTION

The China–United States trade war is an ongoing economic conflict between

China and the United States. President Donald Trump in 2018 began setting
tariffs and other trade barriers on China with the goal of forcing it to make
changes to what the U.S. says are "unfair trade practices" and intellectual
property theft. The Trump administration stated that these practices may
contribute to the U.S.–China trade deficit, and that the Chinese government
requires transfer of American technology to China. In response to US trade
measures, the Chinese government has accused the Trump administration of
engaging in protectionism. On January 15, 2020, the two sides reached a phase
one agreement, however tensions continued to persist. While Trump's
presidency ended in January 2021, experts expect the trade war to continue
under the Biden administration as President Joe Biden has no plans to end the
tariffs in place.
Since the 1980s, Trump has supported tariffs to lessen the U.S. import/export
imbalance and advance homegrown assembling, saying the nation was being
"ripped off" by its exchanging accomplices; forcing duties turned into a
significant board of his official mission. A backgrounder by the Council of
Foreign Relations said that while numerous financial analysts and exchange
specialists didn't really accept that that import/export imbalances hurt the
economy, others accepted that supported import/export imbalances were
frequently an issue, and there was significant discussion over the amount of the
import/export imbalance is brought about by unfamiliar governments, just as
what strategies, assuming any, ought to be sought after to decrease it.
Essentially all financial analysts who reacted to studies led by the Associated
Press and Reuters said that Trump's duties would accomplish more mischief
than anything to the economy of the United States, and a few business analysts
supported for substitute methods for the United States to address its
import/export imbalance with China.
The trade war has contrarily affected the economies of both the United States
and China. In the United States, it has prompted more exorbitant costs for
buyers and monetary challenges for ranchers. In China, the exchange war added
to a log jam in the pace of monetary and modern yield development, which had
effectively been on a decay. Numerous American organizations have moved
inventory chains to somewhere else in Asia, bringing fears that the exchange
war would prompt a US-China financial 'decoupling'. In different nations the
exchange war has additionally caused financial harm, however a few nations
have profited by expanded assembling to fill the holes. It has likewise prompted
financial exchange unsteadiness. Governments all throughout the planet have
found ways to address a portion of the harm brought about by the monetary
struggle.
Universally, there has been support for the ultimate objective of the Trump
organization's exchange battle of attempting to change China's exchange
arrangements, while there has likewise been analysis of the utilization of taxes
and the exchange war's negative monetary effect. Among American businesses,
U.S. organizations and agrarian enterprises have gone against the exchange war,
however most ranchers kept on supporting Trump. Among U.S. government
officials, some couldn't help contradicting the strategies Trump utilized,
however generally concurred to squeeze China.

 The US-China trade relationship

The volume of exchange products between the US and China has developed
quickly since the start of China's financial changes in the last part of the 1970s.
The development of exchange sped up after China's entrance into the World
Trade Organization (WTO) in 2001, with the US and China turning out to be
each other's most significant exchanging accomplices. The US has reliably
imported more from China than it has sent out to China, with the respective US
import/export imbalance in products with China ascending to $375.6 billion out
of 2017.
The US government has now and again scrutinized different parts of the US-
China exchange relationship, including enormous respective import/export
imbalances, and China's generally unbendable trade rates. The organizations of
George W. Shrubbery and Barack Obama forced standards and duties on
Chinese materials to protect US homegrown makers, blaming China for trading
these items at unloading costs. During the Obama organization, the US
furthermore blamed China for sponsoring aluminium and steel creation, and
started a scope of hostile to unloading examinations against China.
Notwithstanding, during these two US organizations, US-Chinese exchange
kept on developing. During this time, China's economy developed to be the
second biggest on the planet (utilizing ostensible trade rates), second just to that
of the US. Huge scope Chinese monetary activities, for example, the Belt and
Road Initiative, the Asian Infrastructure Investment Bank and "Made in China
2025" frightened some US policymakers. All the more extensively, China's
financial development has been seen by the US government as a test to
American monetary and international predominance.
During his 2016 official mission, Donald Trump vowed to lessen the US
import/export imbalance with China, which he credited to uncalled for
exchange rehearses, like licensed innovation burglary and absence of access by
US organizations to the Chinese market. American defenders of duties on China
have contended that taxes will carry producing occupations to the US; that two-
sided levies ought to be complementary; that the US ought to dispose of its
import/export imbalance with China; and that China should change different
arrangements overseeing licensed innovation and speculation. Most business
analysts are distrustful of the capacity of levies to accomplish the initial three of
these objectives. An investigation gauges that U.S. fares to China offer help to
1.2 million American positions and that Chinese worldwide organizations
straightforwardly utilize 197,000 Americans, while U.S. organizations put $105
billion in China in 2019. Financial specialists have considered the effect of
exchange with China and expanding work profitability on work in the American
assembling area, with blended outcomes. Most business analysts accept that
American import/export imbalance is the aftereffect of macroeconomic
variables, as opposed to exchange strategy. While expanded duties on Chinese
products are relied upon to diminish US imports from China, they are required
to prompt expanded imports from different nations, leaving the United States'
general import/export imbalance to a great extent unaltered - a wonder known
as exchange redirection.
  Trump administration's complaints

Donald Trump's initially noted backing for duties was incited by Japanese
monetary accomplishment during the 1980s, contending that the U.S.
import/export imbalance was a weight and that taxes would advance
homegrown assembling that would hold the United States back from being
"ripped off" by its exchanging accomplices. Forcing duties was therefore a
significant board of his effective 2016 official mission. In mid-2011, he
expressed that since China has controlled their cash, "it is practically
unimaginable for our organizations to contend with Chinese organizations."

In the year 2016, US official political race, Trump ran on a protectionist

financial stage. As president, in August 2017, he coordinated the Office of the
United States Trade Representative (USTR) to research Chinese monetary
practices. The subsequent report, given in March 2018, assaulted numerous
parts of Chinese financial strategy, zeroing in especially on supposed innovation
move, which the report expressed expense the US economy $225 billion and
$600 billion every year. Following the giving of the report, Trump requested the
burden of levies on Chinese items, the recording of a WTO body of evidence
against China and limitations on Chinese interest in cutting edge areas of the US
economy.
In supporting tariffs as president, he said that China was costing the American
economy many billions of dollars a year as a result of uncalled for exchange
rehearses. Subsequent to forcing duties, he denied going into an exchange war,
saying the "exchange war was lost numerous years prior by the silly, or
awkward, individuals who addressed the U.S." He said that the U.S. has an
import/export imbalance of $500 billion per year, with licensed innovation (IP)
robbery costing an extra $300 billion. "We can't let this proceed," he said.
Previous White House Counsel, Jim Schultz, said that "through numerous
official organizations — Clinton, Bush and Obama — the United States has
gullibly looked the alternate way while China deceived its way to an unmerited
benefit in the global exchange market."
As per the organization, the Chinese government's changes have been negligible
and have not been reasonable and complementary: "Following quite a while of
U.S.- China exchanges that created insignificant outcomes and responsibilities
that China didn't respect, the United States is making a move to stand up to
China over its state-drove, market-misshaping constrained innovation moves,
protected innovation rehearses, and digital interruptions of U.S. business
organizations."
Innovation is viewed as the main piece of the U.S. economy. As indicated by
U.S. Exchange Representative Robert E. LIGHTHIZER, China keeps an
arrangement of "constrained innovation move," alongside rehearsing "state
private enterprise," including purchasing U.S. innovation organizations and
utilizing cybertheft to acquire innovation. Accordingly, authorities in the Trump
organization were, by mid-2018, finding ways to forestall Chinese state-
controlled organizations from purchasing American innovation organizations
and were attempting to prevent American organizations from giving over their
vital advancements to China as an expense of entering their market. As per
political investigator Josh Ragin: "There was a conviction that China would
build up a private economy that would demonstrate viable with the WTO
framework. Chinese initiative has settled on a political choice to do the inverse.
So now we need to react."
LIGHTHIZER said that the estimation of the taxes forced depended on U.S.
appraisals of the genuine monetary harm brought about by supposed burglary of
licensed innovation and unfamiliar proprietorship limitations that require
unfamiliar organizations to move innovation. Such constrained Joint endeavours
give Chinese organizations unlawful admittance to American innovation.
Over half of members of the American Chamber of Commerce in the People's
Republic of China believed that intellectual property theft was a major concern
when doing business in the country.
Robert LIGHTHIZER launched an investigation into China's alleged unfair trade
practises in August 2017.
"Trade wars are healthy, and easy to win," Trump said when he announced steel
and aluminium tariffs in March 2018, but as the dispute escalated through
August 2019, Trump said, "I never said China was going to be easy."
Peter Navarro, White House Office of Trade and Manufacturing Policy
Director, clarified that the taxes are "absolutely safeguarding efforts" to
diminish the import/export imbalance. He says that the combined trillions of
dollars that Americans move abroad because of yearly shortages are then
utilized by those nations to purchase America's resources, instead of putting that
cash in the U.S. "In the event that we do as we're doing . . . those trillions of
dollars are in the possession of outsiders that they would then be able to use to
purchase up America."
  China's response and counter-allegations

The Chinese government contends that the US government's genuine objective

is to smother China's development, and that the exchange war has negatively
affected the world. The Chinese government has reprimanded the American
government for beginning the contention and said that US activities were
making dealings troublesome. Zhang XIANGHEN, China's representative to the
World Trade Organization, said the U.S. Exchange Representative was working
with an "assumption of blame", making claims without proof and dependent on
theory.
The Chinese government has denied constrained exchange of IP is an obligatory
practice, and recognized the effect of homegrown R&D acted in China.
Previous U.S. depository secretary Larry Summers evaluated that Chinese
administration in some mechanical fields was the aftereffect of "immense
government interest in essential science" and not "robbery" of U.S. properties.
In March 2019, the National People's Congress embraced another unfamiliar
speculation bill, to produce results in 2020, which unequivocally disallows the
constrained exchange of IP from unfamiliar organizations, and awards more
grounded assurance to unfamiliar protected innovation and proprietary
advantages. China had additionally intended to lift limitations on unfamiliar
interest in the car business in 2022. AmCham China strategy advisory group
seat Lester Ross reprimanded the bill, saying the content of the bill was
"hurried" and "wide", and furthermore censured a segment of the bill that
allowed the nation ability to fight back against nations that force limitations on
Chinese organizations.

 EFFECTS OF THE TRADE WAR

In April 2018, China declared that it would dispense with laws that necessary
worldwide automakers and shipbuilders to work through state-claimed
accomplices. Leader of China and General Secretary Xi Jinping repeated those
promises, insisting a longing to build imports, lower unfamiliar proprietorship
limits on assembling and extend security to licensed innovation, all focal issues
in Trump's protests about their exchange lop-sidedness. Trump said thanks to Xi
for his "kind words on levies and car hindrances" and "his edification" on
licensed innovation and innovation moves. "We will gain extraordinary
headway together!" the president added.

By early July 2018, there were negative and positive outcomes previously
appearing in the economy because of the taxes, as various businesses showed
work development while others were anticipating cutbacks. Territorial reporters
noticed that buyer items were the destined to be influenced by the duties. A
timetable of when expenses would rise was dubious as organizations needed to
sort out in the event that they could support a tax climb without giving the
expenses to customers.

American farmers have been especially seriously influenced by China's

retaliatory exchange activities. Accordingly, the Trump organization's guide
help for the challenges looked by the ranchers came as money instalments,
getting extra economic alliance and changing ecological guidelines to profit
corn ranchers. As indicated by the American Farm Bureau, rural fares from the
US to China diminished from $24 billion of every 2014 to $9.1 billion out of
2018, remembering diminishes for deals of pork, soybeans, and wheat.
Homestead liquidations have expanded, and rural hardware producer Deere and
Company cut its benefit figure twice among January and August 2019. An
August 2019 USDA report showed that as American wheat fares to China
dropped, Canadian wheat fares to China rose from 32% to over 60%. Ranch
gear producers were contrarily influenced by the hesitance of ranchers to put
resources into new hardware, with deals dropping fundamentally during the
main quarter of 2019. However, in spite of the adverse consequences, surveys in
July 2019 showed that most ranchers kept on supporting Trump, as 78% of
them said they accepted the exchange war will eventually profit U.S.
horticulture. The Government Accountability Office declared in February 2020
that it would look at the program, in the midst of reports that guide was by and
large inappropriately circulated.
As per an investigation by the National Retail Federation of the United States, a
25% tax on Chinese furniture alone would cost US shoppers an extra $4.6
billion in yearly instalments.

Investigation led by the Peterson Institute for International Economics found

that China forced uniform taxes averaging 8% on the entirety of its shippers in
January 2018, preceding the exchange war started. By June 2019, taxes on
American imports had expanded to 20.7%, while taxes on different countries
declined to 6.7%. The investigation additionally tracked down that normal
American taxes on Chinese merchandise expanded from 3.1% in 2017 to 24.3%
by August 2019.

Monetary development has eased back worldwide in the midst of the exchange
war. The International Monetary Fund's World Economic Outlook report
delivered in April 2019 brought down the worldwide financial development
estimate for 2019 from 3.6% expected in 2018 to 3.3%, and said that financial
and exchange contacts may additionally control worldwide financial
development and proceed debilitate the speculation. As per Capital Economics,
China's monetary development has eased back because of the exchange war,
however by and large the Chinese economy "has held up well", and a lot of
worldwide fares has expanded better source needed] U.S. monetary
development has additionally eased back.

Investigation by Goldman Sachs in May 2019 tracked down that the buyer cost
list for nine classifications of tariffed products had expanded significantly,
contrasted with a declining CPI for any remaining centre merchandise.
In August 2019, Trump exchange guide Peter Navarro attested taxes were not
harming Americans. Politifact evaluated Navarro's attestation "Jeans on Fire."
Studies of customer assessment and private company certainty showed sharp
decreases in August 2019 on vulnerability brought about by the exchange war.
The firmly followed Purchasing Managers' Index for assembling from the
Institute for Supply Management showed withdrawal in August, interestingly
since January 2016; the ISM cited a few chiefs communicating tension about
the proceeding with exchange war, referring to contracting trade orders and the
difficulties of moving their stockpile chains out of China. The IHS Markit
fabricating buying directors' file likewise showed constriction in August,
interestingly since September 2009. The day the ISM report was delivered,
Trump tweeted, "China's Supply Chain will disintegrate and organizations,
occupations and cash will be no more!"
Investigation directed by Moody's Analytics assessed that through August 2019
300,000 American positions had either been lost or not made because of the
exchange war, particularly influencing producing, warehousing, dispersion and
retail.
By September 2019, American makers were decreasing their capital
speculations and postponing employing because of vulnerability brought about
by the exchange war.
A November 2019 United Nations investigation announced that "the U.S. levies
on China are monetarily harming the two nations".
A November 2019 article in the Financial Times said that since August 2019 the
exchange war hit US producers harder than China's.
In December 2019, the South China Morning Post revealed that, because of the
exchange war and the Chinese government's crackdown on shadow banking,
Chinese assembling ventures were growing at the most reduced rate since
records started.
The Wall Street Journal revealed in February 2020 that the USTR was giving
less tax waivers to American firms, down from 35% of solicitations for the
initial two tranches of levies in 2018 to 3% for the third tranche in 2019.

 Overall effects on U.S. economy

Analysts published by The Wall Street Journal in October 2020 discovered the
exchange war didn't accomplish the essential target of resuscitating American
assembling, nor did it bring about the reshoring of industrial facility creation.
Despite the fact that the exchange war prompted higher work in specific
enterprises, taxes prompted a total deficit of U.S. producing occupations. The
exchange war diminished the United States' import/export imbalance with
China in 2019, yet this pattern switched itself in 2020, with the import/export
imbalance expanding back to its pre–exchange war level, while the United
States' general import/export imbalance has expanded.
 EFFECTS ON STOCK MARKET:
Investor uncertainty because of the trade war has caused turbulence in the
securities exchange.
The Dow Jones Industrial Average fell 724 focuses, or 2.9%, after the levies
were reported because of worries over an exchange war.[269] Corporations that
exchanged with China, like Caterpillar Inc. what's more, Boeing, endured huge
misfortunes in their stock cost.
On December 4, 2018, the Dow Jones Industrial Average logged its most
exceedingly terrible day in almost a month as it declined almost 600 focuses, to
which some contend is to some extent because of the exchange war. On
December 26, the Dow Jones recorded an ascent of 1000 focuses in the wake of,
as indicated by Reuters, the distribution of a report that archived solid occasion
deals, albeit the major lists were as yet down over 10% during that time of
December 2018 in the midst of the exchange war.
On August 14, 2019, the Dow dropped 800 focuses, mostly brought about by
expanding exchange pressures between the U.S. furthermore, China. After nine
days, on August 23, the Dow dropped 623 focuses on the day that Trump
casually requested American organizations to promptly look for options in
contrast to working together in China. Before the finish of 2019, financial
exchanges arrived at record highs, having ascended because of the arrangement
between the United States and China to sign the principal period of an economic
alliance.
EFFECT ON OTHER COUNTRIES
Around the world, foreign direct investment has eased back. The trade war has
harmed the European economy, especially Germany, despite the fact that
exchange relations among Germany and China and among Germany and the
U.S. stay great. Germany and the EU have had significant degrees of exchange
with China, and the German government and public need to keep up these
exchange ties. The Canadian economy has seen adverse consequences also.
Like the U.S., Britain, Germany, Japan, and South Korea were all showing "a
powerless assembling execution" starting at 2019. A few Asian governments
have organized improvement measures to address harm from the exchange war,
however business analysts said this may not be viable.
As a result of the trade war, a trade organisation estimated that demand for
semiconductor devices will fall by 12%.
A few nations have profited monetarily from the exchange battle, in any event
in certain areas, because of expanding fares to the United States and China to
fill the holes left by diminishing exchange between these two economies.
Recipients incorporate Vietnam, Chile, Malaysia, and Argentina. Vietnam is the
greatest recipient, with innovation organizations moving assembling there.
South Korea has additionally profited by expanded hardware sends out,
Malaysia from semiconductor trades, Mexico from engine vehicles, and Brazil
from soybeans. Exchange redirection impacts an affect nations in East and
Southeast Asia with Taiwan getting the biggest lift. In any case, US-ASEAN
Business Council CEO Alex Feldman cautioned that even these nations may not
profit long haul, saying that "It's to everybody's greatest advantage to see this
altercation get settled and return to typical exchange relations between the US
and China." Several Taiwanese organizations have been extending creation
locally, including Quanta Computer, Serco mm and Winston, making more than
21,000 positions. This venture prompted a huge reinforcing of the New Taiwan
Dollar which had not been normal pre-Trade War. Nintendo has allegedly
moved some Nintendo Switch creation from China to Southeast Asia.
Some businesses have gone bankrupt as a result of the trade war. One of them,
Chunghwa Picture Tubes (CPT), a Taiwanese LCD panel maker, went bankrupt
as a result of an excess supply of panels and a subsequent price crash, helped by
exposure to the trade war (caused by overexpansion in China), a slowing
Taiwanese and global economy, and a slowdown in the electronics sector.

the US-China exchange war is as yet occurring. Donald Trump started his
administration by exploring unreasonable exchange rehearses China, and
afterward slapping 25% levies on the Asian country. After four years, those
taxes remain. Even after the Phase One economic agreement (intended to be the
first in a progression of arrangements) was endorsed in January 2020, U.S.
levies on Chinese items stayed set up. At the point when the COVID-19
pandemic hit, the exchange war blurred out of spotlight, utilized uniquely to
feature China's failure to meet the states of the arrangement to buy an extra
$200 billion in American items over the 2017 level through 2021 because of the
interruption from the pandemic. The exchange war keeps on desolating the U.S.
economy much under the new Biden organization.

The Biden organization has not made changes to tax structures and is supposed
to analyse the Phase One economic alliance. Wang Yi, the Chinese unfamiliar
priest, as of late requested that President Joe Biden restart converses with China
to eliminate duties and approvals. Wang called attention to that the United
States has significantly lessened reciprocal talks at all levels.

While converses with talk about the exchange war presently can't seem to
appear, toward the finish of February, Biden marked a leader request to
investigate worldwide stockpile chains in four enterprises that were firmly
influenced by the pandemic. These incorporate microchips, enormous limit
electric vehicle batteries, drugs, and basic minerals in hardware. The
semiconductor business confronted genuine bottlenecks at the start of the
worldwide pandemic, when Chinese manufacturing plants were in lockdown.
These enterprises were additionally hit by the U.S.- China exchange war, and
the two outside stuns drove numerous C-suite chiefs to revaluate their
organizations' worldwide production network flexibility.

Biden's new production network technique will require 100-day audits for
makers and wholesalers in these basic ventures, and a year-long survey of
supply chains in six more extensive enterprises. The primary reason for the
surveys is to comprehend how much the businesses are in danger, and in the
long run to instigate enterprises in danger to move providers out of unsafe
conditions or areas. How the Biden organization will change inventory network
structures is indistinct. (As far as it matters for its, China has noticed that the
semiconductor business requires worldwide collaboration for sound
development, yet that it might likewise want to build independence in serious
advancements.)
The consequences of the inventory network audit can be utilized to go into
discussions with China in regards to existing stock chains. In any case, U.S.
exchange authorities have not affirmed that this will be utilized as a hopping off
highlight survey the states of the exchange war. Until the exchange war is
settled, misfortunes from greater expenses will keep on mounting. High U.S.
duties stay on $370 billion of items imported from China. These cover a wide
scope of products, from apparatus parts to fish.
The progressing exchange war is exorbitant and ought to be tended to now. The
issues that should have been tended to all through the exchange war go past an
investigation of supply chains. They cover the material in the Phase One
arrangement, including licensed innovation rights, innovation move, and
extension of exchange buys, just as a general antagonistic way to deal with
U.S.- China exchange that sees an exchange surplus between the two nations as
out of line to the United States. Time ought to be taken to painstakingly address
these issues through a progression of gatherings between the U.S. what's more,
China.

The Biden organization has communicated a wish to talk about U.S.- China
exchange issues with its partners first. It is important that they do this promptly
so relations between the United States and China can be fixed. The
ramifications of the U.S. government's prioritization of inventory network audit
is that Washington wishes to get its stockpile chains to lessen dependence on
China and to build intensity with China in assembling of products like
semiconductors. All things considered, the United States ought not sit around in
drawing in with China to build up what has been, previously, a commonly
helpful relationship.
The need for guaranteed commitment with China is particularly significant if
parts of China's innovation system are seen as "techno-dictatorship." As the
United States readies a survey and enactment that would eventually endeavour
to bring chip producing back home and to put more in innovation, the
concentration in U.S. chats with China ought to be on ways that the two nations
can participate and diminish the most noticeably terrible impacts of the
exchange war.
What is the basis for the US-China trade war?

The United States and China are the two largest economies in the world.
Chinese foreign trade grew rapidly after its ascension into the World Trade
Organization in 2001, with bilateral trade between the US and China almost
US$559 billion in 2019.

However, that trade was lopsided, with the US running a large and growing
trade deficit with China, which became a major political issue in the 2016 US
presidential campaign. The US trade shortfall rose to US$375.6 billion in 2017
before the start of the trade war, from US$103.1 billion in 2002.

The deficit rose further to US$378 billion in 2018, before easing slightly to
US$345.6 in 2019 after the start of the trade war, according to the Office of the
US Trade Representative.

 What is the basis for the US-China trade war?

The United States and China are the two largest economies in the world.
Chinese foreign trade grew rapidly after its ascension into the World Trade
Organization in 2001, with bilateral trade between the US and China almost
US$559 billion in 2019.
However, that trade was lopsided, with the US running a large and growing
trade deficit with China, which became a major political issue in the 2016 US
presidential campaign. The US trade shortfall rose to US$375.6 billion in 2017
before the start of the trade war, from US$103.1 billion in 2002.

The deficit rose further to US$378 billion in 2018, before easing slightly to
US$345.6 in 2019 after the start of the trade war, according to the Office of the
US Trade Representative.

What is the US-China trade war?

The US and China imposed additional 
Tariffs
 on goods imported from the other country, meaning buyers in the opposing
country would need to pay higher import taxes to bring their purchases into the
country.

At its peak at the end of 2019, the US had imposed tariffs on more than US$360
billion worth of Chinese goods, while China had retaliated with import duties of
their own worth around US$110 billion on US products.

How did the trade war start?

US President Donald Trump promised during his 2016 presidential campaign to

reduce the large trade deficit with China, which he claimed was based in large
part on unfair Chinese trading practises, including 
Intellectual property theft
, forced technology transfer, 
Lack of market access
 for American companies in China and an unlevelled playing field caused by
Beijing’s subsidies for favoured Chinese companies.

China, meanwhile, believes the US is trying to restrict its rise as a global

economic power.

When did the US-China trade war start?

The US-China trade war started on 6 July 2018, when the US imposed a 25 per
cent tariff on US$34 billion of Chinese imports, the first in a series of tariffs
imposed during 2018 and 2019.
It continued to escalate, with the US and China imposing various import tariffs
on each other’s products until an agreement in principle on a phase one trade
deal was reached in mid-December 2019. The 
 was formally signed on 15 January 2020, with its provisions taking effect on 15
February 2020.

 What is the phase one trade deal?

US President Trump and China’s chief negotiator, Vice-Premier Liu He, signed
the phase one trade deal at the White House on 15 January 2020. As part of the 
deal, China agreed to buy an additional US$200 billion of American goods and
services over the following two years.

Those additional purchases would be made up of around US$77 billion in

manufacturing, US$52 billion in energy, US$32 billion in agricultural goods
and US$38 billion in services. The latter includes tourism, financial services
and cloud services.

China also pledged to remove barriers to a long list of US exports, including

beef, pork, poultry, seafood, dairy, rice, infant formula, animal feed and
biotechnology, Trump said.

The deal also resulted in the US suspending a new 15 per cent tariff planned for
December 15 on around US$162 billion of Chinese goods, with an existing 15
per cent duty on imports worth around US$110 billion halved to 7.5 per cent.
China also suspended retaliatory tariffs scheduled for that day.

What is the status of the implementation of the phase one trade deal?

The rapid spread of the coronavirus outbreak from January 2020 raised
questions whether China would be able or willing to comply with the terms of
the phase one trade deal.
Former Chinese officials at various points have said China would “definitely”
honour its 
agricultural purchase commitments
 as part of the deal. But they conceded that the coronavirus outbreak may mean
China would have to invoke a force majeure clause, referring to an
unforeseeable act of God, with regard to other planned purchases.
At the end of February, 
US Trade Representative Robert Lighthizer
 and US Agriculture Secretary Sonny Perdue said China was taking numerous
steps to meet the agricultural commitments.

China to make huge purchases of US goods as details of phase one trade deal
revealed

In February, China lifted bans on some pet food products, chipping potatoes,
infant formula, poultry and beef products. It also announced a series of tariff
relief measures, including a process through which importers could apply for 
exemptions,
 while it also resumed buying US pork, sorghum and soybeans.

China was able to pick up its purchases of US goods in 2020, perhaps in an

effort to stop things from collapsing altogether due to tensions continue to flare
over issues ranging from Hong Kong to technology. This saw the US trade
deficit ease to US$26.96 billion in May, compared to US$33.71 billion in June
2018, the month before the trade war began. 

But in the month before the 2020 US Presidential election, 

China’s trade surplus with the US
 was 46.5 per cent higher than the day Donald Trump took office in January
2017. In October 2020, China’s trade surplus with the US rose 18.74 per cent
from a year earlier to US$31.35 billion. This was up from US$30.75 billion in
September. 
And while China's purchases of US farm goods ratcheted up in the run up to the
election, China is still not close to achieving its import targets for 2020.

At the end of September, it was only on track to meet 54 per cent of its purchase
targets, US customs data showed.

While it ramped up imports of soybeans, 

corn
 and pork since the summer months, China is on track to meet just 65 per cent of
agricultural purchase targets this year.
What is next in the US-China trade war?
When the phase one trade deal was signed, Trump insisted that negotiations on
a phase two trade deal would start immediately to address issues such as
Chinese government subsidies that were not addressed in the first deal.
However, the chances of quick progress were immediately played down by 
Liu.
 The rapid spread of the 
Coronavirus
 Outbreak starting in January 2020 effectively postponed negotiations
indefinitely.

President Trump has so far resisted pressure to ease the trade tariffs to offset the
damage the coronavirus pandemic is doing to the global economy. With US and
Chinese tariffs still in place, and phase two negotiations on hold, it is unclear
how long the trade war will last.

The trade war reached its 

Second anniversary
 in July 2020 with the US trade deficit with China having narrowed but wider
relationship seen as being held together by the sticking plaster of a phase one
deal.
But after narrowing earlier in the year, the 
US trade deficit
 With China was 9.15 per cent wider in July 2020 than May 2016, when
President Donald Trump accused China of ‘raping’ the US on trade.
How will a Joe Biden presidency impact the US-China trade war?
Joe Biden’s US election victory
 Will encourage China to try and renegotiate Trump’s trade deal, viewed in
Beijing as being “twisted” in Washington’s favour, according to advisers to the
Chinese government.
Advisers see the deal as being unrealistic for China to implement, and view
Biden as a more “rational and multilaterally minded” leader than Trump –
despite former US officials thinking there is virtually no chance of Biden
giving 
China a “softer” deal

In his first address as president-elect, Biden indicated he would immediately

reverse Trump’s decision to leave the Paris climate agreement and the World
Health Organization, which could open the door for better cooperation with
China, advisers said.

Some veteran diplomats have also urged Biden to replace 

US Trade Representative Lighthizer
 With someone well versed in China policy, calling relationship "the big
enchilada".
Want to know more about the US-China trade war?

Beyond the tweets, beyond the rhetoric are the stories of real people affected by
the US-China trade war. In a six-part podcast series, journalists Finberg
Birmingham and Naomi Ng investigated six objects and the stories they can tell
us about the state of trade.

Also, each week political economy journalist Finberg Birmingham wraps up the
latest developments in tariffs, diplomacy and economics from reporters and
editors at the South China Morning Post in the 
US-China trade war podcast.
The trade war prompted economic distress on both sides and headed to the
diversion of trade away from China and the United States. “US economic
growth decreased, business investment depressed, and companies didn’t hire as
many people. Across the nation, a lot of farmers became bankrupt, and the
manufacturing and shipping transportation sectors have caught lows not
witnessed after the last recession. Trump’s operations amounted to one of the
highest tax raises in years.”

A September 2019 study found that the trade war had already obligated the US
economy approximately 300,000 jobs and an expected 0.3% of real GDP. Other
researches established the cost to the US GDP at around 0.7%. A 2019 report
predicted that the trade war would obligate the US economy $316 billion by the
end of 2020, while more recent analysis from the Federal Reserve Bank of New
York and Columbia University discovered that US companies dropped at least
$1.7 trillion in the value of their stocks as a result of US tariffs taxed on imports
from China.

Various studies have found that US companies fundamentally paid for US

tariffs, with the cost expected at approximately $46 billion. The tariffs imposed
American companies to receive lower profit margins, deduct wages and jobs for
US workers, delay potential wage hikes or expansions, and support American
consumer’s or companies’ values. A representative from the American Farm
Bureau said that “farmers have dropped the large majority of what was once a
$24 billion market in China” due to Chinese retaliatory actions.

Meanwhile, the US goods trade deficit with China remained to increase,

touching a record of $419.2 billion in 2018. By 2019, the trade deficit had
narrowed to $345 billion, approximately the same level as 2016, originally due
to decreased trade flows. It should be seen that, while the US deficit with China
reduced, its overall trade deficit did not. Trump’s unilateral tariffs on China
redirected trade flows from China, affecting the US trade deficit with Europe,
South Korea, Mexico, Japan, and Taiwan to rise.

China also witnesses economic distress due to the trade war, though not enough
to surrender to the Trump administration’s center demands for significant
fundamental reformation. Indeed, as the trade war pulled on, Beijing decreased
its tariffs for its other trading partners as it decreased its confidence in US
markets. Both sides declared the final deal on January 15, 2020, frequently
agreeing on the offer Beijing had put on the table from the commencement —
raised goods purchases plus engagements on enhanced intellectual property
security, currency, and required technology transfer.

Abstaining from the deal was any progressive movement on subsidies, state-
owned enterprises, and China’s industrial policy to benefit its own companies.
The development of market introduction also confirmed the underwhelming end
of the financial sector. These and other hurdles were put off for a phase two
agreement, which Trump recently announced is not granted.

Throughout this period, President Trump made attempts to generate a

smooth and positive relationship with China — particularly with Xi
Jinping — and described his attempts to encourage trade negotiations. 

Trump praised Xi’s power and leadership openly while shying away from
bilateral dispute points in private engagements. Instead, Trump reportedly
managed his private exchanges with Xi to propose him to act on his
private priorities, most of that associated with the trade negotiations, and,
for a time, North Korea.

In June 2019, Trump reportedly assured Xi Jinping in a private phone call

that the United States would abstain from criticizing China over Hong
Kong while trade negotiations were continuing. 

The following month, Trump said he assumed that President Jinping had
acted “very responsibly” with the protests in Hong Kong, adding, “We’re
working on trade agreements right now. We’ll see what results.” He
publicly declared related opinions in November when he shied away from
criticizing Jinping about Hong Kong and connected the issue to trade
negotiations, saying, “We have to stand with Hong Kong, but I’m also
supporting President Jinping.” 

He further said that President Jinping is “a friend of mine, he’s an

incredible guy,” and described the Hong Kong protests as a “complicating
circumstance” in trade talks. On January 10, 2020, when Laura Ingraham
on Fox News questioned President Trump concerning “the human rights
issue in China” and referenced “a million people in internment camps, and
reeducation camps,” he replied, “Well, I’m driving a fine line, because
we’re forming…great trade deals.”

John Bolton, the then-national security adviser, insists that the logic
behind President Trump’s prioritization of a trade deal above other
concerns with China were made evident in a private meeting with
President Jinping at the June 2019 G-20 summit in Japan. According to
Bolton, Trump told Jinping to proceed ahead with construction camps to
detain 1 million or more Uyghur Muslims in Xinjiang, saying it was the
right thing to do and asked President Jinping to support him the upcoming
presidential election by boosting purchases of soybeans and wheat. 

US President Donald Trump later questioned Bolton’s characterization of

events, tweeting that Bolton’s book “is a collection of lies and made up
stories”; Trump denied Bolton’s allegations about Xinjiang. Still, at a
campaign rally in Manchester, New Hampshire, on February 10, 2020,
Trump announced, “Last month, we approved a groundbreaking trade
contract with China that will disappoint so many of our competitors.”

Although other Trump administration members, which include Vice

President Mike Pence and Secretary of State Mike Pompeo, have been
abrupt in their criticism of China’s suppression at home and aggression
abroad, their comments have not been observed in Beijing replacement for
presidential disgrace. 

During this period, the Trump administration took a broad range of

operations against China, including tightening export restrictions,
questioning Chinese technology companies, improving investment
screening, and blunting the Belt and Road Initiative. 

In Beijing’s top-down Leninist system, though, other leaders’ signs send to

Jinping, and Jinping’s acknowledgments to those messages sustain
meaningful weight. Neither the United States nor any other nation receives
to have two foreign policies with China. There is only one. Beijing’s wires
are tuned to the signs that other administrators send.

To be clear, the Chinese leadership holds complete responsibility for its

carelessly nationalistic movements along its border and its cruel
suppression at home. Beijing’s judgments to lead in its current direction
were made more straightforward, though, by its faith in Trump’s close
focus on trade and his concern is not allowing other problems to obstruct
the achievement of a deal or hinder the deal’s implementation.

Even in the weeks after the signing of phase one trade deal, President
Trump continued to reassure Jinping of his support. For weeks, Trump
regularly appreciated Jinping’s response to the fast spread of the pandemic
COVID-19 in China. Trump’s tone would not change until the pandemic
COVID-19 took its damage to the United States.

The two nations declared a split in the trade war at a particular signing
ceremony at the White House, including President Trump and Chinese
Vice Premier Liú Hè 刘鹤, the 11th ranked member in the Chinese
leadership. Although the contract’s full text has not been made public,
statements say the contract binds China to purchase an extra $200 billion
in American products over two years above 2017. 

The text of the deal that has been made public shows China committing to
guard American intellectual property, prevent coercive technology
transfers, and abstain from doing currency devaluation as a trade weapon.
It also added an implementation mechanism that would permit import
tariffs if conflicts are not fixed.

In the six months after the deal was signed, China’s possibilities pushing
its purchasing targets have decreased considerably. 

According to Bloomberg predictions based on Chinese Customs

Administration data, China, in the first half of 2020, had purchased only
23% of the total purchase point for the year. While part of this is
attributable to trade flow disturbances caused by the pandemic COVID-19,
much of the gap owes to the agreement’s inefficiency from the
commencement. In the phase one deal, as explained by Brad W. Setser and
Dylan Yalbir at the Council on Foreign Relations, China pledged to
purchase about $60 billion more in US goods than it had in 2017 $180
billion in US goods this year. Yet US goods exports to China are presently
significantly under what they held in 2017.

In other words, Beijing almost paid for the deal with the commitment of a
windfall in purchases of American goods. It resembles that President
Trump admitted an IOU as a statement of victory.

The future will tell if the implementation agreement’s reforms will

succeed where others have deserted, and much will depend on China’s
eagerness to change deals into law and, crucially, implement them. Yet the
crucial question for the United States — particularly today, as the US
economy is in its most unfavorable state after the Great Depression as a
consequence of the pandemic COVID-19 — is if the economic damages it
paid for those implementation contracts were worth the billions of dollars
dropped in value, the hundreds of thousands of jobs mislaid, the stagnation
of US manufacturing, and the destructive consequences of the trade war on
American farmers.

Ultimately, phase one deal failed because it, along with the trade war,
critically damaged the US economy while missing to make significant
progress in radically fixing the US-China trade relation’s fundamental
shortcomings.