Question

Write one page on recent Developments in Chinese Trade with America

Answer 1

Before we move to the recent developments, let us first try to understand the current trade relationship between both the countries.

China is currently the United States’ largest merchandise trading partner, its third-largest export market, and its biggest source of imports. In 2015, sales by U.S. foreign affiliates in China totaled $482 billion.U.S. firms acknowledge China’s market as critical to their global competitiveness and imports lower-cost goods from China This just doesn’t impact the firms but also provide US consumers will low cost products. There are a considerable number of US firms that use China as the final point of assembly for their products, or use Chinese-made inputs for production in the United States, are able to lower costs. China is also the largest foreign holder of U.S. Treasury securities. China’s purchases of U.S. debt securities help keep U.S. interest rates low.

The emergence of leaders like Trump in US and Xi in China is a reflection of broader ideological shifts in both countries, which has recently impacted the Chinese Trade with America.

Despite growing commercial ties, there is no denial that the bilateral economic relationship has become increasingly complex and a tension can be noticed between the two countries. From the US perspective, many trade tensions stem from China’s incomplete transition to a free market economy. While China has significantly liberalized its economic and trade regimes over the past three decades, it continues to maintain (or has recently imposed) a number of state-directed policies that appear to distort trade and investment flows.

The Americans believed that economic liberalisation in China would eventually lead to political liberalisation. However, recent constitutional change in China rubber-stamped a change that would allow President Xi Jinping to rule for life.

Another major area of concern expressed by U.S. policymakers and stakeholders include China’s alleged widespread cyber economic espionage against U.S. firms. Americans are also upset about China’s relatively ineffective record of enforcing intellectual property rights (IPR); discriminatory innovation policies; mixed record on implementing its World Trade Organization (WTO) obligations; extensive use of industrial policies (such as subsidies and trade and investment barriers) to promote and protect industries favored by the government; and interventionist policies to influence the value of its currency. Many U.S. policymakers argue that such policies adversely impact U.S. economic interests and have contributed to U.S. job losses in some sectors.

When seen from the China’s side, the Chinese assumed that the US would continue to support free trade. But recently on March 8, 2018, President Donald Trump announced tariffs on steel and aluminium and tweeted that “trade wars are good and easy to win”. The matter to note here is that, China is the world’s largest producer of both of these commodities, this make the trade relationship worse.

On April 1, China announced that it had retaliated against the U.S. action by raising tariffs (from 15% to 25%) on various U.S. products, which together totaled in $3 billion in 2017. On March 22, President Trump announced that action would be taken against China under Section 301 over its IPR policies deemed harmful to U.S. stakeholders. On April 3, the U.S. Trade Representative (USTR) released a proposed list of 25% ad valorem tariffs on about $50 billion worth of Chinese products. The next day, China countered by releasing a list of U.S. products that would be hit by a comparable level of tariff hikes. On April 4, Trump responded to China’s list by asking the USTR to issue a second list of proposed tariffs on $100 billion worth of Chinese products.

The Trump Administration has pledged to take a more aggressive stance to reduce U.S. bilateral trade deficits, enforce U.S. trade laws and agreements, and promote “free and fair trade,” including in regard to China.

The above mentioned recent developments indicate that bilateral trade relations are becoming increasingly strained.