The document describes the escalation of the China-US trade war, detailing its origins rooted in issues such as currency manipulation and intellectual property theft. It outlines key events including tariff announcements and China's retaliatory measures, while questioning the long-term outcomes for both nations involved. The text also speculates on the potential geopolitical shifts, particularly concerning the role of the US dollar versus the Chinese yuan in global trade.

1. THE CHINA-US TRADE WAR
Seminars on Chinese Economy
Henri Meylan, AEW2017539001
Yasser, IBW2017539036 April 2018, UIBE, Beijing

2. SUMMARY
• I. An historic of the escalation between the two major powers:
the trade war escalation from the election of Trump to the April’s
2018 trade tariffs.
• II. The Origin of the trade war: currency manipulations, trade
restrictions, intellectual property theft
• III. The Outcome of the war: Going further…What will happen on
the long term? Who will win the arm wrestling game?
• Question time

3. PRIOR TO THE ESCALATION: DURING
ELECTIONS CAMPAIGN
• Trump took advantage of how American workers thought of US-
China trade deficit. He made repeated promises to impose tariffs on
Chinese imports to reduce the deficit advocating it will bring jobs and
money back in US.
• Trump claimed it was shameful for how pervious leaders of US
brought US into such a big trade deficit.
• Chinese government didn’t officially respond to Trumps warning
during the election campaign claiming it was not a official waring
from US government.

4. I. AN HISTORIC OF THE ESCALATION
BETWEEN THE TWO MAJOR POWERS
PRE-TRADE WAR
• April 2017 -- Trump launches investigation into steel imports: President
Trump, who has repeatedly vowed to bring manufacturing and jobs back to
the United States, directs the Department of Commerce to investigate
whether imports of foreign steel from China and other countries could be a
threat to national security.
• August 2017 –Trump launches investigation on China: US government
launched a government probe, explicitly targeting at China. Investigations
focus was on alleged Chinese theft of US intellectual property. The
government agency later estimates that intellectual property theft by China
costs the US "between $225 billion and $600 billion" every year.

5. I. AN HISTORIC OF THE ESCALATION
BETWEEN THE TWO MAJOR POWERS
$250BN TRADE DEALS:
• US and China signed trade deals worth $250bn on Trump’s trip
as he vowed to change 'unfair' relationship.
• Many of the contracts signed appeared to represent purchases
Chinese mobile phone makers, airlines and other customers would
have made anyway that were saved for signing during Mr Trump's
visit.
• Many felt that Trump was satisfied and that trade issues would
resolve. But it was not knowing the great salesman.

6. I. AN HISTORIC OF THE ESCALATION
BETWEEN THE TWO MAJOR POWERS:
• March 1 2018, announced steep tariffs on steel (25%) and aluminum (10%) that
would take effect the following week. economic policy director Gary Cohn quit the
administration over it.
• The global reaction was swift and fierce, European and other foreign leaders
(Canada), members of Congress and captains of U.S. industry.
• March 8, tariffs put into effect, by March end exempted from tariffs included
members of the European Union, Canada, Mexico, Argentina, Australia, Brazil and
South Korea.
• On March 22, Trump and the 301 commission suggest tariffs on up to $60 billion of
Chinese imports, including components used in the aeronautics, technology and
energy industries.
• And then…

7. CHINA’S RESPONSE:
• China responded to the U.S. tariffs in kind, announcing new taxes on
American imported meat, wine, fruit, nuts, ethanol and other
products. ( 20 billion dollars for US Farmers )
• April 3, U.S. Trade Representative released a list of 1,300 product
categories covered by the 25 percent China tariffs.
• April 4, China answered with its own 25 percent tariffs on a still-
longer list of American goods, including whiskey, cars and soybeans.

11. II. THE ORIGIN OF THE TRADE WAR:
• To sum up Trump accuses China
of 3 things:
1. China is stealing intellectual
property (investigation 301)
2. China is manipulating its
currency
3. China has trade barriers that
are too high on imports or
restrictions on foreign
investments
• Thus for Trump the trade deficit
mechanically destroys jobs (2
millions jobs) and decreases the
GDP of the US.
• Trump said last march 2018 the
deficit with China was 500 billions
dollars in 2017. Sorry, it is 375
billions in fact.
• So, he thinks China has much
more to lose in a trade war than
the US.
For trump, the trade deficit is a loss for America

12. II. THE ORIGIN OF THE TRADE WAR:
• 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
• The U.S. has threatened to
implement up to $50 billion of
tariffs against China through
Section 301 investigation
• The main concern of the 301 investigation
is the forced transfer of technology for
American companies to make business in
China. Currently they are many
requirements.
• Concerns of Cyber-espionage of certain US
companies, with IP addresses linked to
China concerning stolen trade secrets,
pirated software, and counterfeiting.
It is not clear on which of these 3 accusations Trump is basing the tariff
war he started, but let’s review them one by one
1. Intellectual propriety theft accusation?

13. II. THE ORIGIN OF THE TRADE WAR:
• China use to peg its currency to the
dollar until 2016, but now has
partially stopped this practice:
liberalization of the RMB
• Current account surplus of $69.3
billion in the first six months,
accounting for only 1.2 percent of
the national GDP of China: China is
not a currency manipulator.
• In January 2018, the U.S. debt to
China was $1.17 trillion and
increasing.
Currency manipulator indicator for the
US: 4% of positive current account
over the GDP. China is not concerned
2. Currency manipulation?

14. II. THE ORIGIN OF THE TRADE WAR:
• True for a few products like the car market, with 25% trade barriers, and joint
venture are mandatory: there are 5 independent Chinese electric car company in
the US, none US counterpart in China.
• The service industry is slowly opening up with new free trade zones for healthcare,
finance and telecom without the need of joint venture.
• For the most part, China is going towards liberalization with a new negative list for
investments and import tariffs released in December 2016.
Trump is not aware of the concept that free trade is never fully equal with
developing countries like China. WTO believes in gradual opening of these
countries, with non reciprocal trade barriers.
3. China has too many trade restrictions for
foreign goods, services and investments ?

15. II. THE ORIGIN OF THE TRADE WAR:
• To sum up: accusation of currency manipulation is less and less based, especially
since 2016.
• The trade restrictions on certain imports and investments exist but are slowly
disappearing. Also China pledged to increase its imports and remove restrictions
to reduce long term disequilibrium.
• Intellectual propriety theft of high tech is where there are the biggest concerns.
The initiative of China to upgrade its manufactory power to go up the global value
chain through the made in China 2025 policy is a big concern since innovation and
high tech is the competitive advantage used by the US. 2011 electronic product
deficit for the US: 136 billions, but only 54 billion if you count for added value
deficit.
• Another factors not mentioned: Trump’s personality. He is a businessman. He uses
threats and confrontation as a way of obtaining “good deals”
A summary:

16. III. THE OUTCOME OF THE WAR
• Trump is receiving heavy criticisms from around the world, from
some of his supporters like farmers (soya beans and pork ) but also
from his own party. The trade war also weakens Wall Street. It is a
risky gamble.
• On the other hand, the Chinese government has cash surpluses to
support its economy, full support from the population. Xi Jinping also
has no “reelection” problem ahead.
• China would win the arm wrestling game ?
Will Trump obtain what he wants?

17. III. GOING FURTHER…WHAT WILL
HAPPEN ON THE LONG TERM?
• But according from the same article of the Washington Post called: In a
U.S.-China trade war, who has more to lose? Trump might obtain what
he wants.
• Li Keqiang had already declared that he could ease the access for US
companies and stop forcing them to transfer technology. China is less
willing to engage in a trade war than the US.
• Trump would enjoy a small economic victory but a big political one in the
US. “I did more than the Obama administration. “
• But those changes would not help the U.S. trade deficit with China or to
deter China from plans to go head-to-head with the United States in
many high-tech sectors soon.

18. III. GOING FURTHER…WHAT WILL
HAPPEN ON THE LONG TERM?
• Petroyuan VS petrodollar: On the very long term, China is tampering
with the central role of the Dollar.
• It wants to start importing its oil by using RMB instead of dollars.
China is the number importer of oil in the World.
• The ability for the US government to print money without fear of
inflation is based on the global trust in the dollar as the greatest
international currency.
• If the global trust of the dollar is broken, the US will have to face the
dangers of inflation and bankruptcy. No US president wants that.
Bonus

19. QUESTION TIME
• What do you think of this trade war? Is it detrimental for both
sides or do you think the US had some understandable reasons
to start such war?
• Your prognostic: who will have the upper hand on the long-term
and why?
Thanks for your attention !