On September 17th, the United States (US) government announced that the country would impose tariffs of 10% on $200 billion of Chinese goods, which went into effect on September 24th.
Escalation of the US-China Trade War
|It is getting more difficult for the world to see President Donald Trump and Xi Jinping shaking hands due to the trade war. (Bloomberg photo by Qilai Shen)|
In his statement on September 17th, President Donald Trump announced that the US would levy new tariffs of 10% on $200 billion worth of goods from China, which accounted for about 40% of the total value of Chinese exports to the US in 2017. He then explained that this announcement was in response to China’s unfair practices on American companies even though he had urged Chinese leaders to take action on free trade for months.
Conflicting Interests of the US and China
As a response to the US, China’s finance ministry stated “tit-for-tat” measures, which were designed to impose new levies of up to 10% on about 5,200 products from the US, including cocoa powder, frozen vegetables, chemical products, and certain aircraft, starting from September 24th. In addition, two days after the two countries’ announcements, China filed a complaint with the World Trade Organization (WTO) against the US’ sanctions. Other than imposing retaliatory tariffs, China has also called off its visit of a delegation to the US and are even considering introducing non-tariff barriers such as increased inspections and slower custom clearances against the US.
Possible Effects on the World Economy
The increasing trade tensions between the two countries are expected to affect the world economy as well. Some economists, however, think that protectionist measures by the US and China will not impact on the global economy that much. According to a report from the United Nations Conference on Trade and Development (UNCTAD) in 2017, the sum of the exports of goods between the US and China accounts for only 5%, which is a very small share of global exports. Moreover, as the US-China trade war escalates, rival countries like Mexico might benefit. In particular, Mexico, the second biggest exporter to the US, could benefit from its exports of electrical machinery or nuclear reactors and machinery. On the other hand, some people argue that countries like Korea, with a high level of dependence on trade, should not underestimate the impact of the trade war and keep an eye on how the US and China deal with each other.
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