US-China Trade Tensions: Why, What and the India Dimension

  Jun 12, 2020

US-China Trade Tensions: Why, What and the India Dimension

What is the background?

President Donald Trump in 2018 began setting higher tariffs and other trade barriers on China with the goal of forcing it to make changes to what the U.S. says are "unfair trade practices".  As a result over the past year, the world's two largest economies have imposed tariffs on billions of dollars’ worth of one another's goods.

How do the two countries perceive the trade war?

So far, Washington has imposed tariffs on hundreds of billions of dollars’ worth of Chinese goods to pressure Beijing into changing its policies on

Beijing has consistently denied that it engages in unfair trade practices, and has retaliated with tariffs on a wide range of US products.

In China, there is a perception that the US is trying to curb its rise.

What tariffs have been imposed?

Mr Trump's tariffs policy aims to encourage consumers to buy American by making imported goods more expensive.

Till September, the US has imposed tariffs on more than $360bn (£296bn) of Chinese goods, and China has retaliated with tariffs on more than $110bn of US products.

Beijing has hit back with tariffs ranging from 5% to 25% on US goods.

China’s latest tariff strike included a 5% levy on US crude oil, the first time fuel has been hit in the trade battle.

How does the latest round of hikes in October 2019 differ?

The US has imposed fresh tariffs on $112bn (£92bn) of Chinese imports such as shoes, nappies and food which could cost households $800 a year. The move is the first phase of US President Donald Trump's latest plan to place 15% duties on $300bn of Chinese imports by the end of the year.

In response, Beijing began to introduce measures targeting $75bn worth of US goods.

It's the American consumer who will bear the brunt of these fresh tariffs, unlike previous rounds which have hit the manufacturing sector hardest.

What was initially a dispute over China's allegedly unfair trade practices is increasingly seen as a geopolitical power struggle.

Who are the sufferers in the US?

In the United States, the trade war made it hard for 

What about Huawei Technologies?

Chinese telecom giant Huawei (pronounced "wah-way") today is at the centre of escalating trade dispute between the U.S. and China. The resistance that Huawei is facing in the U.S. is part of a broader battleground in which the Chinese telecom giant is tackling rising opposition from many foreign governments and customers concerned about Huawei's links to the Chinese government. US is organising global opposition to it.

Have negotiations taken place?

Negotiations are ongoing but have proven difficult. The two sides remain far apart on issues including how to roll back tariffs and enforce a deal.

Earlier in October US announced that China and the United States had reached a tentative agreement for the "first phase" of a trade deal, with China agreeing to buy up to $50 billion in American farm products, and to accept more American financial services in their market, with the United States agreeing to suspend new tariffs scheduled for mid-October. The deal was expected to be finalized in coming weeks.

Can India benefit?

There are many types of types of impact.

When the global economy slows due to the trade tensions, our exports will also decrease; growth suffers; employment is hurt and so on.

In a few sectors we may find export opportunities in the US and China as they increase tariffs on each other. For example, carpets to the USA.

In having greater investment in India as they leave China, India faces certain challenges. What are they?

They are

South­East Asia — especially Vietnam and Thailand — has emerged as a formidable competition with their long standing open economies and human capital.

Have we made any reforms particularly to attract foreign capital?

Yes. Corporate tax cuts that are steep; liberalisation of FDI and so on.