China-US trade war: the global economy will become the biggest loser
Trump seems to regard the change of China's so-called unfair trade relationship as a top priority. The United States imposed huge tariffs on Chinese goods, and the world’s two economic superpowers fought fiercely.
Last month, the US-China economic confrontation escalated, and Trump announced a tariff on other Chinese goods worth $300 billion.
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Trump said in his 2016 presidential campaign: "The huge amount of trade is the only influence we can exert on China." The "Daily Telegraph" commentary published on August 27th said that this is why the United States has a bad relationship with China.
The reason Trump criticized China is that he believes that China's Asian production base has taken away American technology, and that China is manipulating currency, lowering the price of its goods, and defeating American companies at low prices.
Tariff war against China
The key goal of Trump's disclosure is to reduce the trade deficit with China. The US-China trade figures vary widely from month to month, so the trade deficit reduction will not be immediately apparent. But the trade war seems to be not big for the annual deficit, and the policies adopted by China are more reactive.
China’s retaliatory tariffs on US imports have benefited US competitors because products made outside the United States have become relatively cheaper in the Chinese market.
As for how to win the trade war, the Daily Telegraph article said that one way is to impose tariffs or adjust the currency, and tariffs are the main means for Trump to trade in China.
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China is also tit for tat, increasing tariffs on US goods. But the US-China trade deficit means that China imports less than the United States from the United States, so China’s tariffs on the United States are weaker. Money is also another means of fighting economic warfare. Countries such as China, which are heavily dependent on exports, will benefit from a weaker currency, because that means they can offer cheaper goods to foreign customers.
In terms of tariffs, the United States is imposing a 25% tariff on Chinese goods valued at 250 billion, including equipment, clothing, food, minerals and others from China. The United States also plans to increase tariffs to 30% from October 1. It is also planned to impose a 15% tariff on another 300 billion Chinese goods.
The uncertainty brought about by the trade war has affected China. The Daily Telegraph article argues that China’s severe impact is on capital expenditures as domestic and foreign investors are becoming more cautious. Exports and factory production were also affected, and China’s economic growth in the second quarter of this year was the lowest in the past 27 years. However, Chinese consumers still seem to continue to maintain consumer spending.
On August 27th, "Betis" magazine published an analysis article by Kenneth Rapoza, saying that if the trade war is further escalated to financial sanctions, the United States will take measures to prohibit Chinese companies from raising capital in the United States. The global market is confusing because investors are worried that stock investments, including Chinese companies, are affected by Washington's policies.
The development of the Sino-US economic war to that extent may trigger a recession in China, and the Chinese recession will have a disastrous impact on Southeast Asia and bulk exporters such as Australia and Brazil.
The Sino-US economic war may lead to a recession in China, which will have a disastrous impact on Southeast Asian economies and commodity exporters such as Australia and Brazil (Australian iron ore)
China's counter-measures and uncertainty
In turn, China imposes a 5-25% tariff on US$110 billion worth of US goods, including medical equipment and some chemical products. The current tariff on car imports is 15%. In the future, China will also express more tariffs on goods valued at $750, including a 25% tariff on cars and a 5% tariff on auto parts.
According to the analysis of Forbes, the above retaliatory tariffs benefit American competitors, because products made outside the United States become relatively cheap in the Chinese market. In order to enter the Chinese market, US companies may move to Southeast Asia or mainland China.
The Daily Telegraph article argues that the tariff burden is generally borne by the importer, which means that most of the company pays directly at the price of the United States. Trump seems to have misunderstood this because he has repeatedly insisted that tariff costs are paid by China, but his own assistants don't think so.
Trade wars have severely affected some industries, such as the US soybean market. After the disappearance of Chinese demand, these industries experienced a recession.
La Boza believes that for American companies, the main problem is the uncertainty brought about by the trade war. American companies need certainty. Their problem is not lack of funds. The Federal Reserve’s interest rate cuts will not help them.
The Daily Telegraph report quoted an analysis by economic research firm Capital Economics that China is retaliating against the United States while remaining harmless. But in this regard China is approaching the limit. If the United States continues to withstand the effects of the trade war, Trump will have to find a way to convince the American public.
So what happens in the future? The Daily Telegraph said that it is still not clear. The United States and China resumed negotiations next month, but did not announce the specific date of the talks. At present, it seems that the new tariff will be implemented in September, and what will happen in the future will only be guessed.
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