The document discusses the US-China trade war, highlighting its economic implications including trade deficits and the imposition of tariffs by both countries. It details the impact on global trade, particularly the diversion of trade flows, and notes the potential opportunities for India to enhance its exports and manufacturing capabilities. The document also emphasizes the need for India to reform its land and labor laws to fully benefit from the ongoing economic shifts.

1. Financial Mathematics Project
Group Members:
Ayush Mehar
(191000011)
Priyansh Pandey
(191000037)
Rahul Thakkar
(191000039)
Vinay Agarwal
(191000056)
Under the guidance of:
Dr. Kuldip Singh Patel

2. US-CHINA
TRADE WAR

3. WHAT IS A TRADE
WAR
US-CHINA TRADE
EFFECTS ON
GLOBAL ECONOMY
Future
BACKGROUND
TIMELINE OF
EVENTS
Implications for
india

4. What is a Trade War?
A trade war is an economic conflict between countries. This results in both countries imposing trade
protectionist policies against one another in the form of trade barriers.
These barriers can be imposed in a number of different ways, including but not limited to tariffs,
import quotas, domestic subsidies, currency devaluation, and embargos.
As each country imposes a trade barrier, the other country will retaliate with another policy. This
creates the “warring” concept.

5. Background
China had overtaken US in terms of GDP PPP in 2014,
and US viewed it as a threat to its global hegemony
US trade deficit had been continuously increasing
with China reaching an all-time high of ~$420B

6. Former US President Donald
Trump had won in the elections
in 2016 mainly riding upon the
sentiments of people in the
industrial belt wherein he had
repeatedly insisted that the
Chinese were taking away
manufacturing jobs and
“cheating” the United States.

7. Top US Exports to China
● The overall U.S. goods and services trade deficit with China was $285.5 billion in
2020.
● The U.S. goods trade deficit with China was $310.3 billion(9.9 percent decrease over
2019) whereas US has a services trade surplus of $24.8 billion with China down
37.3 percent from 2019).
● The top export categories (2-digit HS) in 2020 were:
■ electrical machinery ($17 billion)
■ agricultural products ($26.5 billion)
■ machinery ($14 billion)
■ mineral fuels ($10.0 billion)
■ optical and medical instruments ($9.5 billion).

8. Top US Imports from China.
● U.S. goods imports from China totaled $434.7 billion in 2020 (down 3.6 percent from 2019).
● Major imports included:
■ Telecommunications and other wireless networking apparatus ($48.50 billion)
■ Games and toys ($17.70 billion)
■ Furniture ($8.45 billion)

9. Timeline of events in 2018

11. Demand: Market Access
● Lower tariff and non-tariff barriers on US exports.
● Reduce 300B$+ trade deficit
● Stop subsidizing companies
Demand: IP Reform
● End forced tech transfers for Joint Ventures
● Greater intellectual property rights enforcement
● Stop cyber intrusions into US govt. and private
companies
Demand: Enforcement mechanism for deal
● Tariffs gradually removed to ensure compliance
● Tariff “snap-back” if China reneges on commitments
● References to specific Chinese laws that must be
changed
Response:
● Resumed purchases of US soybeans, rice and LNG
● Cut tariffs on US cars and agricultural goods
Response:
● Announced new expanded punishments for IP
infringement
● Pledged to treat state, private and foreign firms equally
● Considering a law that would forbid the practise of
forced tech transfers
Response:
● Considering removal of all tariffs

12. The trade war caused economic pain on both sides and led to diversion of trade flows away from
both China and the United States.
● Meanwhile, the U.S. goods trade deficit with China continued to grow, reaching a record
$419.2 billion in 2018. By 2019, the trade deficit had shrunk to $345 billion, roughly the same
level as 2016, largely as a result of reduced trade flows.
● While the U.S. deficit with China decreased, its overall trade deficit did not. Trump’s unilateral
tariffs on China diverted trade flows from China, causing the U.S. trade deficit with Europe,
Mexico, Japan, South Korea, and Taiwan to increase as a result.

14. Impact on GDP (sectoral contributions) 2018-19 yoy

16. Implications for India
● The United States and China are major trade partners of India in international business and
can fulfill the huge gap of trade deficit through export.
● Diversification of investment flows in automobile, agriculture, equipment, healthcare,
electronics & garments manufacturers to seek India as one of the sound alternative
manufacturing destinations.
● India can seek more opportunities in the enhancement of information and communication
technology, eCommerce, the chemical industry, outsourcing, and the automotive sector.
● Some of the key factors of Indian economy are emerging economy, highly skilled manpower,
huge market size, business outsourcing, stability in the growth.

17. Opportunities
for
India vis-a-vis USA
vis-a-vis China
India can become USA’s go to
textile exporter
India can increase its export of
precious gems and jewellery
India can export its surplus
agricultural produce such as corn
and soybean
India can become China’s software
industry partner

18. Future
● In today’s era of globalization and integrated supply chains, the US-China Trade
War has related in significant contagion effects throughout the world.
● India saw the sharpest decline in GDP growth rate in Q4 of the fiscal year 2019-
20 due to the trade war amongst other reasons.
● Though, India is still set to gain from this trade war lest it plays its cards right.
For that India will have to reform its existing land and labor laws. This will
improve India’s Ease of Doing Business and promote competitiveness.