A systematic approach to the 'Trade War' from accusation to events and consequences. I've kept it relatively simple as the presentation was meant for undergrad students.
2. WHAT IS TRADE WAR?
A trade war is an economic conflict resulting from
protectionism in which two or more countries raise
or create tariffs or other trade barriers against
each other in response to trade barriers created
by the counterparty.
3. MAJOR ACCUSATIONS
•Ballooning ‘Trade Deficit’
•RMB(yuan) - Currency Manipulation
•Theft of Intellectual Property
•High trade barriers and restrictions on foreign
investments.
4. TRADE DEFICIT
•The balance of trade includes the imports and
exports of the country within a set time period
(usually a Quarter or the Financial Year).
•Trade Deficit is the amount by which the cost of a
country's imports exceeds the value of its exports.
7. CURRENCY MANIPULATION
•China has been accused of ‘pegging’ its currency
to the USD at weak rates.
•When a government initiates a currency peg, it
fixes its currency’s value to that of another
country. This is done by buying or selling it’s
foreign reserves, to maintain a constant exchange
rate.
•Since 2017, China has partially stopped this
practice.
8. CURRENCY MANIPULATION
•This approach makes Chinese exports cheaper
and, therefore, more attractive compared to those
of other nations.
•By motivating the global marketplace with
greater motivation to buy its goods, China ensures
its economic prosperity.
9.
10. MISUSE OF IPR / PATENT
•The Commission on the Theft of American Intellectual
Property estimates the annual costs from the loss of
intellectual property ranges from $225 billion to
$600 billion.
•Donald Trump has threatened to implement upto
$50 billion in tariffs against China through Section
301 of the Trade Act (1974).
•The main concern of the Section 301 investigation is
the forced transfer of technology from American
companies to be allowed to do business in China.
11. IMPORTANT DATES/EVENTS
Date Event
March 22, 2018 Trump initiates investigation to apply tariffs on
US$50–60 billion worth of goods on Section 301
of the Trade Act (1974) for theft of IPR.
April 2, 2018 Ministry of Commerce of China responded by
imposing tariffs on 128 products, including
airplanes, cars, and soybeans (25% tariff), as
well as fruit, nuts, and steel piping (15%).
June 15, 2018 Trump declared that the United States would
impose a 25% tariff on $50 billion of Chinese
exports. $34 billion would start July 6, with a
further $16 billion to begin at a later date.
August 14, 2018 China filed a complaint with the WTO, stating
that US tariffs on foreign solar panels clash with
WTO ruling on Solar PV products.
12. Date Event
September 17, 2018 The US announced its 10% tariff on $200
billion worth of Chinese goods would begin
on Sept. 24, increasing to 25% by the end
of the year.
September 18, 2018 China retaliates promptly with 10% tariffs
on $60 billion of US imports.
November 30, 2018 President Trump signed the revised U.S.–
Mexico–Canada Agreement. The USMCA
also aims at preventing any non-market
economy, especially China, from taking
advantage of the agreement.
December 1, 2018 The planned increases in tariffs were
postponed. The White House stated that
both parties will "immediately begin
negotiations on structural changes.”
13. Date Event
May 5, 2019 Trump stated that the previous tariffs of
10% levied in $200 billion worth of Chinese
goods would be raised to 25% on May 10.
June 1, 2019 China announces that it will raise tariffs on
$60 billion worth of US goods.
June 29, 2019 During the G20 summit, Trump announces he
and Xi Jinping agreed to a "truce" in the
trade war until negotiations are complete.
August 5, 2019 The U.S. Department of Treasury officially
declared China as a Currency Manipulator.
China stops purchases of US agriculture
products.
August 9, 2019 China announces an accelerated decrease
of US treasury holdings, targets 25% of its
current holdings of $1.1 trillion.
14. GAINS & LOSSES OF THE US
Gains:
•Low unemployment rates due to better self dependency.
•Bull-run in the US stock market.
•Lower trade deficit.
Losses:
•Hurts the agricultural sector.
•Rising cost of imported materials for manufacturing.
•Economic slowdown (temporary/possible trend)
15. GAINS & LOSSES OF CHINA
Gains:
•Lower dependence on the US economy on the growth of
China’s GDP.
Losses:
•Lower export surplus.
•Shanghai Composite (SSE) fell by 17% since 2018.
•Forced to bear rising costs to make exports economically
feasible.
•China’s reputation on a global scale.
16.
17. GLOBAL RAMIFICATIONS
•At the global level, the additional impact is
expected to subtract about 0.3 percent of global
GDP in the short term, with half stemming from
business and market confidence effects.
•Consumer price inflation due to higher tariffs.
•Decreasing global trade volumes.
•Other economies have been caught in the crossfire.
(Example: Vietnam)
18.
19. EFFECT ON INDIA
•India’s share of world exports rose to 1.71 percent
in the first quarter of 2019 from 1.58 percent in
the fourth quarter of 2017.
•Chinese imports of Indian goods surged 31% in the
past year mainly due to substitution of US exports
to other Asian economies.
•The Indian Rupee has depreciated due to higher
current account deficit and lower FDI because of the
trade war.
20.
21. CRITICISMS OF THE TRADE WAR
•While the Trump administration's position that the
Chinese do not abide by fair and transparent rules
for global trade was broadly correct, employing
unilateral tariffs is a self-defeating approach and
the administration should instead pursue a coalition-
based trade strategy.
•The Trade War lead to the on-going economic
slowdown and eventually recession.
•The tariffs are not the solution to stop China from
violating IPR as per agreements.
22. SMOOT-HAWLEY TARIFF ACT (1930)
•The 1930 Smoot-Hawley Tariff Act was a trade
war that many economists believe worsened
the Great Depression.
•It increased 900 import tariffs by an average of
40% to 48%.
•Smoot-Hawley was designed to support U.S.
farmers who had been ravaged by the Dust Bowl.
But it also raised food prices for Americans who
were already suffering from the Great Depression.
