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US-China import tariffs: Why the world’s biggest economies may be headed for a trade war

US vs China: Are we on the brink of a trade war? The United States has announced tariffs on up to $60 billion imports from China, which has reacted by unveiling its own plans to set up duties of up to $3 billion on US imports. Here is everything you need to know about the US-China trade dispute.

By: Express Web Desk | New Delhi | Published: March 23, 2018 4:03:05 pm
US-China trade dispute, United States, China, Tax imports US President Donald Trump on Thursday announced tariffs on up to billion imports from China, drawing a sharp reaction from the country.

Global financial markets slumped on Friday as the United States and China engaged in a trade dispute. US President Donald Trump on Thursday announced tariffs on up to $60 billion-worth of imports from China, drawing a sharp reaction from the country, which unveiled its own plans to set up duties of up to $3 billion on US imports. Japan’s Nikki fell 4.1 per cent, Shaghai’s shares were down 3.3 per cent, Australian stocks lost 2.1 per cent, Taiwan shares slid 1.7 per cent and South Korea’s KOPS retreated 2.3 per cent. The Dow on Thursday shed 2.9 per cent. In India, the BSE Sensex opened 400 points lower, while the broader Nifty traded below 10,000 in the opening hours.

What has Donald Trump announced?

The Trump administration on Thursday announced trade sanctions on China. President Trump has signed a presidential memorandum that could impose duties on up to 1,300 steel and aluminium products or $60 billion worth of imports from China. The memorandum provides a brief breathing period — 60 days — before the sanctions are imposed, which will allow industry lobbyists and legislators a chance to respond to Trump’s action. It will also give China time to respond.

The restrictions will be imposed under the US Trade Representative’s “Section 301” investigation into alleged misappropriation of US intellectual property by China, reports The Associated Press.

Express Editorial | Trump has thrown a challenge, which should serve as a wake-up call for governments, including India’s

Describing China as a “friend”, Trump said Thursday, “We have spoken to China and we are in the middle of negotiations.” He added that the loss of American jobs from unfair trade was one of the main reasons he had been elected in 2016.

Why has Trump taken such a step?

The US has accused China of breaching intellectual property law and participating in unfair business practices through which US investors are forced to turn over key technologies to Chinese firms. It claims these practices have given the country an unfair advantage.

“Many of these areas are those where China has sought to acquire advantage through the unfair acquisition and forced technology transfer from US companies… establishing its own competitive advantage in an unfair manner,” Everett Eissenstat, deputy director of the National Economic Council, said. He added that the US could also look at ways to curb Chinese investments in the US.

US-China trade dispute explained US President Donald Trump displays signs a presidential memorandum imposing tariffs and investment restrictions on China in the Diplomatic Reception Room of the White House, Thursday, March 22, 2018, in Washington (AP/PTI)

Further, Washington has also demanded that China shrink its annual trade surplus with the US by $100 billion. It was $375 billion in 2017. US imports far exceed its exports leading to large deficits each year — something Trump had rallied against during his campaign and presidency.

Trump has also challenged China’s technology licensing programme at the World Trade Organisation. In a statement, US said, “China appears to be breaking WTO rules by denying foreign patent holders, including US companies, basic patent rights to stop a Chinese entity from using the technology after a licensing contract ends.”

How has China responded?

In a statement, the Chinese commerce ministry urged the US to “pull back from the brink”. It stated: “China doesn’t hope to be in a trade war, but is not afraid of engaging in one. China hopes the United States will pull back from the brink, make prudent decisions, and avoid dragging bilateral trade relations to a dangerous place.”

China doesn’t hope to be in a trade war, but is not afraid of engaging in one

“We intend to impose tariffs on certain US imports to balance out the losses caused to Chinese interests by the US tariffs on imported steel and aluminium,” the ministry was quoted as saying by Reuters.

The Xi Jinping-led country is now planning to impose tariffs on up 128 products or $3 billion worth US imports. China is mulling imposing tariffs in two stages, first a 15 per cent tariff on US products like dried fruit, wine and steel pipes worth $977 million and later a 25 per cent tariff on pork products and recycled aluminium worth $1.99 billion.

China is also likely to target soybean and automobiles, and possibly halt production of iPhone devices, which would really hurt the US economy. Chinese ambassador Cui Tiankai, meanwhile, was quoted by Reuters as saying, “We will retaliate. If people want to play tough, we will play tough with them and see who will last longer.”

Will this affect other countries like India?

Trump’s decision to impose tariffs on Chinese imports is likely to bear an impact on economies supplying the US and China. India’s G20 Sherpa Shaktikanta Das, taking to Twitter today, expressed concern over the dispute between the large economies. “Tariff skirmishes between large economies are a matter of concern for global growth. These countries need to analyse whether it really benefits their domestic economy. Such trade issues need to be resolved through mutual engagement,” he said.

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