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Unraveling the US-China Trade War



  May 18, 2024

Unraveling the US-China Trade War



The US has significantly escalated its trade war with China by imposing steep tariffs on a wide array of Chinese imports, including electric vehicles, computer chips, and medical products. President Joe Biden's administration has cited "unacceptable risks" to U.S. economic security due to what it perceives as unfair Chinese trade practices, such as flooding the global market with underpriced goods.

Background

The trade tensions between the US and China have been simmering for years, with both nations imposing tariffs on billions of dollars' worth of each other's goods. The situation intensified during Donald Trump's presidency, which saw the first major wave of tariffs. President Biden has not only maintained these tariffs but has now chosen to escalate them further in an effort to protect American industries and counteract China's trade practices.

Details of the New Tariffs

The new measures impact $18 billion in Chinese imported goods, including:

- Steel and aluminum
- Semiconductors
- Batteries
- Critical minerals
- Solar cells
- Cranes

These tariffs are part of a broader strategy to encourage the production of these goods within the United States and reduce dependency on Chinese imports. Notably, the tariffs on electric vehicles will increase from 25% to 100%, and tariffs on lithium-ion EV batteries from 7.5% to 25%. Additional increases are planned for the coming years, affecting other key sectors such as semiconductors and solar panels.

 Economic and Political Implications

The decision to increase tariffs comes amidst a backdrop of complex political and economic considerations:

- Domestic Industry: The tariffs aim to bolster U.S. manufacturing by making Chinese imports less competitive.

- Election Politics: With an election looming, President Biden is likely aiming to appeal to voters who are skeptical of his economic policies. A tougher stance on China could help sway voters concerned about jobs and Chinese competition.

- Global Trade: These measures mark a significant departure from the free-trade policies that once dominated U.S. politics. This shift could have lasting impacts on global trade relationships and supply chains.

- Inflation Concerns: While the tariffs are intended to protect American jobs, they could also lead to higher prices for consumers and contribute to inflation, which has been a persistent issue in recent U.S. economic discourse.

 Response from China

China has criticized the increased tariffs as counterproductive, arguing that they will only inflame tensions and disrupt economic recovery efforts post-pandemic. The Chinese government has often responded with reciprocal tariffs, and this situation may lead to further escalations in the trade war.

 Broader Impact

The ongoing trade war has broad implications not only for the two economies involved but also for global economic stability. Other countries could face disruptions in their supply chains, and multinational companies may need to rethink their production and sourcing strategies.

 Conclusion

The US/China trade war underlines significant shifts in international trade policies and reflects broader geopolitical tensions between the two superpowers. As both nations continue to assert their economic and political agendas, the global community remains watchful of the potential ramifications on international trade and economic stability.



SRIRAM’s


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