2. THE ELECTION OF DONALD TRUMP RESULTED IN MARKED SHIFT
TOWARDS CHINA
What has happened so
far?
Why the Trade War
Started
• US has a high trade deficit with
China, estimated $308.8 billion in
2019
• Alleged intellectual property theft by
Chinese companies
• Lack of market access for US
companies in China
• Subsidies offered to local Chinese
manufacturers that makes foreign
companies difficult to compete in
China
• The US, under Donald Trump
administration, has pursued to bring
manufacturing back to the US
• Starting 2018, US and China have
imposed tariffs on number of goods
ranging from agriculture products to
commodities such as steel
• US imposed various sanctions on
Chinese tech giant Huawei
• In Jan 2020, US and China reached
an agreement for Phase 1 trade deal
where China committed to buy an
additional $200 billion of American
goods and services by 2021
• China has, however, fallen short of its
Jan 2020 deal commitment, reaching
only 53 percent of the expected
purchase target through September
2020
What Next?
• With Joe Biden set to take over as the
President of the US in Jan 2021, the
US stance will largely depend on his
approach hereafter
• Its likely that the US might be more
accommodative but unlikely that it
would go back to the pre-2016 stance
on China
• However, there might be more
predictability as per the direction
and stance which the Biden
administration takes in the future on
US-China relations
3. 2017
2018
2019 and 2020
• Trade talks between the US and
China begin with the primary aim
of reducing US trade deficit with
China
• Trade talks fail between the US
and China in July 2017
• The US started imposing tariff
on Chinese imports on goods
such as solar panels, steel, and
aluminum, etc.
• China retaliated with counter
tariffs on the US imports
• The trade war continued with both
countries imposing tariffs
• In 2019, US mellowed its stance
and talks were held between the
US and Chinese officials but no
agreement was reached
• In Oct 2020, US announced a
Phase 1 deal that included
suspension of planned tariffs
US-China Trade War Brief Timeline
THE US-CHINA TRADE WAR HAS GOTTEN WORSE OVER TIME BUT
WITH ELECTION OF JOE BIDEN TO THE WHITE HOUSE, THERE MIGHT
ME A MORE ACCOMODATIVE VIEW AT WHITE HOUSE
4. • A September 2019 study by Moody’s
Analytics found that the trade war had
already cost the U.S. economy nearly
300,000 jobs and an estimated 0.3% of
real GDP
• A 2019 report from Bloomberg
Economics estimated that the trade war
would cost the U.S. economy $316
billion by the end of 2020
• A research from the Federal Reserve
Bank of New York and Columbia
University found that U.S. companies lost
at least $1.7 trillion in the price of their
stocks as a result of U.S. tariffs imposed
on imports from China
BOTH CHINA AND THE US HAVE BEEN AFFECTED BY THE TRADE
WAR, WITH OVERALL COSTS FOR CONSUMERS INCREASING
US CHINA
• US tariffs on Chinese goods has made
exports from other countries
competitive
• In first half of 2019, US tariffs has inflicted
an estimated $35 billion blow to Chinese
tariffed exports in US market that is
approximately 25% export loss
• US sanctions on Huawei has highly
impacted the company and limited the
China’s flagship tech giant reach globally
• Some studies point out that the trade war
has slowed down an already slowing
Chinese economy, with companies
diversifying their supply chains amid
trade war and COVID-19 pandemic
5. • A large part of manufacturing is expected to shift away from China as
companies try to diversify their supply chains. India is expected to be
one of the biggest beneficiaries of the shift
• As per UN trade and investment body, India gained about $755 million
in additional exports, mainly of chemicals, metals and ore, to the US in
the first half of 2019 due to the trade diversion effects of Washington's
tariff war with China
• The top three sectors in India that could benefit from the trade war are:
pharmaceutical, chemicals and engineering
Challenges:
• The land and labor laws posses a challenge to the companies that see
India as a favorable destination
• The infrastructure issues further exasperate the problems for India
INDIA NEEDS TO CARRY OUT REFORMS TO BECOME THE
BENEFICIARY OF THE ONGOING US-CHINA TRADE WAR
