US China trade war

1. RAISING GLOBAL PROTECTION AND ITS
IMPACT ON INDIAN ECONOMY WITH
REFERENCE TO US CHINA TRADE WAR
Prepared By:
Bindu, H. A.
Ph.D Scholar

2. CONTENTS
 PROTECTIONISM
 TRADE WAR
 US CHINA TRADE WAR
 US INDIA MINI TRADE WAR
 GLOBAL IMPACT
 IMPACT ON USA
 IMPACTON INDIA
 IMPACT ON AGRICULTURE
 US CHINA TRADE DEAL
 CONCLUSION

3. PROTECTIONISM
It is the trade measure or economic policy imposed by
countries Governments to protect their domestic businesses and
industries from foreign competition.
Protectionism is the economic policy of restricting
imports from other countries through different methods such
as tariffs on imported goods, import quotas and other government
regulations.

4. TYPES OF PROTECTIONISM
Tariffs Quotas
Exchange
controls
Export
subsidies
Voluntary
Export
Restraints

6. India has its own closet of
protectionism
• India as amongst the top few countries with the
highest number of restrictive trade practices, even
after adjusting for liberalizing measures.
• On the policy front, India has been hesitant to join
multilateral trade agreements.
• This includes the Regional Comprehensive Economic
Partnership (RCEP) – comprising of 10 ASEAN
countries and their six free trading agreement partners
– India, China, Australia, New Zealand, Japan and
South Korea
• Make in India

7. PROTECTIONISM EFFECTS

8. TRADE WAR ??...
A trade war is an economic conflict resulting from
extreme protectionism in which countries raise or create tariffs or
other trade barriers against each other in response to trade
barriers created by the other party.
A situation in which countries try to damage each other's
trade, typically by the imposition of tariffs or quota restrictions.

9. THE ORIGIN OF US CHINA TRADE
WAR
 Intellectual property theft accusation.
 Trade deficit
 Currency manipulation

10. Intellectual Property Theft
Accusation
• It was estimated by US that the annual costs from loss
of intellectual property ranges from 225-600 billion
USD
• Stolen trade secrets, pirated software and
counterfeiting
• China forced American companies to transfer
technology to access the Chinese market, which were
violations of WTO rules

11. TRADE DEFICIT

12. TRADE DEFICIT
• The US imported a record of 539.5 billion USD in
goods from China and exported 120.3 billion USD.
• The trade deficit accounted for 419.2 billion USD
• China forms the largest part of the US trade deficit
• Trade deficit was observed as threat to US jobs and
national security

13. Currency Manipulator
• US accused China of manipulating its currency
to gain unfair competitive advantage in
international trade

14. Timeline of US China trade war

15. Products targeted
By USA
Steel
Aluminum
Solar panels
Washing machines
By China
Electronics
Automobile parts and
components
Semiconductors
Machinery
Offal, Pork, Nuts

16. China's response and counter-
allegations
 The Chinese government has denied forced transfer
of Intellectual Property and acknowledged the impact
of domestic R&D performed in China
 China accused the US of deliberately destroying
international order with unilateralism and
protectionism
 U.S. government's real goal is to stifle China's growth

17. US direct action on India
• First, Trump imposed tariffs on Indian steel and
aluminum on March 23, 2018,
• Trump imposed tariffs of 25 percent on $761 million of
steel and of 10 percent on $382 million of aluminum
imported from India.
• India’s exports of steel products fell by 46 percent since
the tariffs were imposed. (12 b USD)
• US also initiated protectionist action against India, as the
latter runs a trade surplus with the US.

18.  The US withdrew favourable treatment under the
Generalised System of Preferences (GSP) on India
during 5 June 2018
 US also had
 Disagreement on market access.
 US expressing concern over restrictions on foreign
companies in the e-commerce and retail space
 sector-specific regulations in pharma and dairy, data
localization rules, etc.
 Trump’s GSP-related tariff hike affected $5.8 billion of
India’s export
 India finally on June 16 2019 implemented its retaliation
to Trump’s steel and aluminum tariffs

19. Trump's Mini-Trade War with
India

21. India’s new tariffs of June 16, 2019, covered $1.3 billion of
exports, or roughly 5.5 percent of US exports to India

22. But there were two main forces that
limit additional US tariffs on India.
• First is the economics. India only exports $50
billion per year to the United States, whereas
China exports 10 times that amount.
• Second is the geopolitics. India benefits from
certain security and diplomatic partnerships and is
one of the few, relatively friendly, democracies in
the region.

23. Global impact
• The level of global real GDP has reduced 0.1%in 2018,
0.8% in 2019, and 1.4% in 2020.
• Real global exports of goods and services has decreased by
2.4% . The sharpest declines in real exports occur in China
and in the North American countries.
• Not surprisingly, the United States experiences the largest
decline in real imports of goods and services. Compared
with the baseline level, real US imports fall 4.5%.
• Due to the high import content of its exports, China also
experiences a significant drop in real imports, which fell to
3.2%.

24. • Vietnam is by far the largest beneficiary, gaining 7.9%
of GDP from trade diversion, where trade diversion is
mostly additional U.S. imports
• Vietnam is the biggest beneficiary, with technology
companies moving manufacturing there.
• For the next top three, Chile, Malaysia and Argentina,
the trade diversion is mostly additional China imports.
• South Korea has also benefited from increased
electronics exports.
• Malaysia from semiconductor exports,
• Mexico from motor vehicles, and
• Brazil from soyabeans exports

25. Foreign investment has
become sluggish

26. Economic Sectors hurt Globally

27. Impact on USA
• Higher prices for importers of intermediate products
• Real U.S. GDP has decreased by about 0.3%, reduced real
consumption by 0.3%, reduced real private investment by 1.3%, and
reduce real household income by $580 (about 1%)
• Real U.S. exports have become 1.7% lower and real imports are 2.6%
lower.
• CBO explained tariffs have reduced U.S. economic activity in three
ways:
1) Consumer and capital goods become more expensive;
2) Business uncertainty increases, thereby reducing or slowing
investment and
3) Other countries impose retaliatory tariffs, making U.S.
exports more expensive and thus reducing them

28. • Uncertainty due to the trade war has caused turbulence in the
stock market, with investors "rattled" by the conflict
• Due to the trade war, Chinese investment needed by American
aircraft manufacturer ICON Aircraft was cut in August 2019.
This necessitated laying off 40% of the company workforce
and cutting ICON A5 aircraft production to fewer than five
aircraft per month, from a target of 20 aircraft per month

29. Other impacts
 Real fixed investment is restrained in the trade war scenario,
reflecting losses in real exports, financial stress, declining
equity prices, and reduced foreign investment in emerging
markets targeted by US import tariffs.
 Lost Exports

30. Impact on China
• 25% export loss (35 billion dollars): Chinese firms were
competitive enough to maintain 75% of their exports despite
tariffs
• The trade war has indirectly caused some companies to go
bankrupt. One of them, Taiwanese LCD panel manufacturer
Chunghwa Picture Tubes (CPT), went bankrupt as a result of
an excess supply of panels and a subsequent collapse in prices.
• China would have trouble finding enough American goods to
penalize if it sought to impose a proportional retaliation.
China bought only $130.4 billion worth of American goods
last year, while the United States bought $505.6 billion worth
of Chinese goods.

31. • The most substantial losses are in China, as
both foreign and domestic investors will take a
more cautious approach to capital spending in
China.

32. Impact on both US and China
Since the trade war started in July 2018, GDP
growth has slowed in both the U.S. and China,
down to 2.1% and 6%, respectively.
The overall U.S. trade deficit hasn’t
changed since 2018, while China’s rose
slightly in 2019.

33. US CHINA TRADE WITH WORLD

34. Impact on Indian Economy
 Has gained only a little
 Trade diversion effects (smaller but substantial)
755 million dollars – additional exports
 243 million dollars – Chemicals
 181 million dollars – Metals and ore
 83 million dollars – Electrical machinery
 68 million dollars – Other various machinery
 180 million dollars – textile, apparel,
furniture etc.

35. Opportunities that India
could have captured
• India could have reduced trade gap with China
by export of Soya bean
• China’s software industry partner
• Enhance the flow of Chinese investment
towards India
• Increase in exports in textile, garments and
gems and jewelry

36. Impact on Agriculture
Chinese buyers imported $19.5 billion in U.S.
farm goods in 2017, a number that was more
than halved the following year as the tariffs
made U.S. agriculture products more pricey

37. PLUNGING EXPORTS

38. As for beef, it was noted that 11 per cent rise in New Zealand
beef exports in the year to October 2019. China has effectively
been outbidding the United States for New Zealand product.

39.  Both Argentina and Brazil countries have supplied China with soybeans
 Brazil alone exported a monthly record of 5.16 million tonnes of
soybeans in November 2018, with some 94 per cent destined for China.
 The US Soybeans Export Council issued a report on Dec 27 last year
saying the United States exported soybeans worth more than $12.25 billion
to China in 2017, but in the first 10 months of 2018 the exports declined
sharply to around $3.1 billion.

40. US and China sign deal to ease
trade war
• Tariff rollback: The deal cancels the tariffs originally set to take
effect on December 15, 2019 that would have affected mass
consumed Chinese-made imports like cellphones, toys, and
laptops.
• Expanding trade and services: A centerpiece of the deal is
China’s pledge to purchase a minimum of 200 Billion USD
worth of additional US goods and services over the next two
years.
• The agreement contains provisions to protect confidential
information considered to be trade secrets.
• The agreement also calls for China to submit an “Action Plan to
strengthen intellectual property protection”

41. • Technology transfer: The two countries also agreed to a provision
that would prevent either government from directing or supporting
domestic companies to acquire foreign technology that could create
“distortion” in sectors and industries
• Currency: The deal prohibits both the US and China from
manipulation of exchange rates or interest rates to devalue their
respective currency. China also agreed to publicly disclose its
foreign exchange reserves and quarterly imports of goods and
services

42. THANK YOU