The economic and now snowballing into currency trade war between China and the United States have led many experts to comment and speculate on the current situation of world economy and the crude beneficiaries from this battle of hegemony. In the recent years, US imposed three rounds of tariffs on more that $250bn worth of Chinese goods. These duties have been imposed on goods ranging from agricultural products to railway machinery. In retaliation to this, China too hit back with tariffs on $110bn of US goods, accusing the US of starting “the largest trade war in economic history”. The tariffs were levied by the Trump government in theory to make the US made products cheaper and alluring for the consumers to buy than the imported ones.
Initially, a truce was promised in December between both the economic super powers, but America raised tariffs of $200bn on Chinese products. Although the Chinese economy had geared up for this situation, but with the unexpected industrial output growth slacking to more than a 17 year low, the economy now mutely yells for a need for speed. Investors and economists fear that this could trigger a global recession.
China is not the only country on the brunt edge of the bullet. America too is facing set backs as it has put tariffs on agricultural import and received export tariffs. Due to the heightened prices of agricultural machinery the farmers in the US are facing a major setback. With the coming elections both sides sitting on this economic see-saw, China and US are considering to reposition these agricultural tariffs.
Why is the US targeting China
There a few plausible reasons for the horse viewed-aimed shot of America towards China-
The primary reason of the dominance that America has on the world economy is the dominance of the dollar currency. It has become a reserve currency as more than 60 percent of the world trade takes place in dollars in lieu of it’s local currency, insured by the US banks. They make sure that most of the export contract transitions are made in dollars, even though it isn’t the local currency of the buyer or seller. Henceforth, it is speculated that one of the reasons that the President of Iraq- Saddam Hussein was hanged is due to the fact that he was demonetising oil contracts in Euro and local currencies. The position of the dollars has recently been shaken to the core by none other than- China. It too has taken steps towards demonetising contracts and making transactions in local currencies. Other countries too have taken courage seeing China’s bold economic moves.
Another major concern to Trump administration is it’s very strength- technology and space advancements. China is becoming one of the paramount technologically advanced country’s with it’s home grown multinational companies. Huawei is one of them taking lead in terms of mobile technology. Research released that it is gaining ground over major rival companies such as Apple and Samsung, as Apple’s high price are putting consumers off. This is one of the reasons why Huawei has been black listed from American technology. China’s lead on making it’s own alternative to Google and Facebook, is being copied by Russia and Brazil. This is a major showdown to America as Google amounts to a large monetary sector of digital income.
The jackals of this economic war will be Mexico, Australia, Germany, Iran and Russia, and Asian economies. America imports it’s electronic goods from China in masses, but with the tariffs in place, it will have to seek out a more feasible option- Mexico. America will have to move towards Germany in terms of import of cars as it’s initial distributor was China. Economies of Bangladesh, Thailand, Malaysia may favour from this war, as America looked towards China for it’s trade of cheap merchandise.
There are many wicked twists and turns to this war, but one thing that can be noted for sure is that if escalated it will become the greatest ever economic war to take place.
Miss Ananya Chaturvedi
Student of Media & Communications at Manipal School of Communications