The Trade War Between China And American

WAR! The first thing that comes to one's mind is bloodshed, loss of lives and destruction. But in today's world, the word 'war' has broadened in ways more than what one can imagine. It has expanded its horizon from primarily targeting human lives to national economies. A few years ago, ‘Trade War’ wasn’t the headline that a common man would wake up to. However, the past few months have been rather intriguing as the US has embroiled itself in what is touted to be the biggest trade war in history. In what appears to be tit-for-tat, the latest row of tariffs that the US has slapped China with covers a whopping $200 billion worth products. Approximately, half of the Chinese imports are subjected to a ten percent tax which is likely to increase to 25 percent next year. China has been alleged of data theft by the US resulting in the compromise of its confidential data. In response to USA’s allegations, China states that it is playing fair by the World Trade Organization’s rules. With regard to tariffs placed by the USA, China in a tit-for-tat has placed tariffs on $60 billion of US goods. Analyzing the current scenario, it doesn’t seem that either of the sides is willing to sit down and compromise to come to a mutual agreement for the benefit of both economies. Instead, US has gone to the extent of reproaching China for meddling elections which has only deepened the cracks between two of the strongest economies in today’s world.

According to analysts, the real motive behind America’ s move is to eventually reduce and unwind the interconnectedness and interdependence of one economy on the other. China and America have seldom been on the same page with regard to many geo-political and military issues. However, if there was a common thread that bound the two nations together then, it was ‘trade’. With the multi-fold growth in the field of telecommunications and the subsequent emergence of tech-giants like Alibaba, the United States of America dreads the security of classified and confidential data and views China as a threat to its national security. In a bid to safeguard national security, America has initiated steps that would curb and discourage the reliance and dependence of the American population on the Chinese economy by placing tariffs on goods. One of the immediate repercussions on the US economy was the decrease in China’s investment in the country.

On the other hand, American companies are planning to move operations out of China owing to the ongoing trade war that only seems to worsen by the day. Earlier, considering lower costs and higher outputs, China was the preferred destination for setting up factories and manufacturing units. However, bearing in mind the present-day issues, production in China has taken a toll on several market titans, for instance, Apple, Boeing, Ford and Starbucks to name a few. These American companies have made hefty amounts of profits from customers in China until a few months ago. Evaluating the contemporary market situation, it is unlikely that these American companies will be able to grow or even maintain their current sales. China has taken up monetary measures to combat the market turmoil. Lately, in order to bring in liquidity into its market, the central bank has lowered the reserve requirement ratio by one percent from October 15 which will bring in a net $109. 2 billion into the banking system. Meanwhile, China is striving to maintain a six percent growth rate this year by taking up a cautionary optimistic approach.

The repercussions on the global economy seem to show a deeply alarming trend. Shares in Asia have fallen overnight despite the central bank having had taken up monetary measures by increasing liquidity so as to counterbalance the tariffs placed by America. Stock markets in Europe have also had to face the brunt. Germany’s DAX, Italy’s FTSE MIB, UK’s FTSE have fallen by 0. 6, 1. 4 and 0. 3 percent respectively. The trade war is predicted to be long drawn-out considering the facts that both the sides are rather petulant, and hopes for constructive talks and mutual agreements are out of sight. The IMF has likewise predicted a drop in growth rates of both the economies for the year 2019. It will be an interesting watch to see as to which economic power gets through and emerges to benefit eventually from the biggest trade war in history.