History Of Us-China Trade War
History of US-China trade war
China’s national currency, the Yuan, has been added by the International Monetary Fund (IMF) as the world’s official foreign exchange reserve currencies. In 2017, China produced $23.1 trillion gross domestic product (GDP) which is more than the European Union (EU) or the United States (US) and regarded as the world’s largest company (Amadeo, 2018). China’s government has released ‘Made in China 2025’ as a ten-year plan to make china dominant at design, software and production in global high-tech manufacturing era (Annunziata, 2018).
In September 2013, Chinese president Xi Jinping announced the Belt and Road (B&R) initiative which claimed will build strong and prosperous nations to ensure sustainable and stable economic development among the Eurasian countries (Witte, 2013). The (B&R) initiative goal is to foster the link of infrastructure, trade and investment. This initiative will link China to Central and South Asia in the “Belt” area (Silk Road Economic Belt) and link China to the nations of South East Asia, the Gulf Countries, North Africa and on to Europe in the “Road” side (New Maritime Silk Road) (Boffa, 2018).
This initiative is not a new idea, it is the regeneration by the current Chinese government that has been done during the Han Dynasty era of China. Back to the 2nd century BC, when Zhang Qian, a Chinese imperial official and diplomat, was sent to west by the Han Emperor Wudi to form alliances against the nomadic Xiongnu tribes. This was the initial establishment of the Silk Road. Henceforth, the journey to the West regarded as the first contact of Chinese with the Western world and subsequently the Silk Road became an important trade route (PWC, 2017).
Holmes (2018) found that 76 countries from Asia, Africa and Europe are participating the initiative and more than $300 billion has been invested by Chines companies in Eastern Europe. International Monetary Fund (IMF) believes that (B&R) initiative could fill infrastructure gaps, strengthen supply chain and boost growth prospects of the participating countries (Lagarde, 2018).
However, there some parties which argue that China’s (B&R) initiative is merely a debt trap, this statement referring to some financing cases in ASEAN countries. The struggle of Indonesian government to boost their infrastructure while the rupiah is among the world’s worst-performing currency might be seen as an opportunity for China to offer them a new source of financing an become a reluctant participant in (B&R) initiative (Bharat, 2018).
The experience of Sri Lanka has been a lesson of fears for other countries. The inability of Sri Lanka to repay the loans ask them to give China a century lease of their port (Bloomberg, 2018). In response to it, the new Malaysian government has accused China of securing their influence by offering the infrastructure debt that the recipient could never afford and has halted US$ billion of (B&R) project. Similarly, Thailand’s minister said “Thailand is not Laos” when China offer them a proposal of infrastructure project in 2016 (Bharat, 2018).
In the 2016 US presidential campaign, Donald Trump accused China on the practice of unfair trade with the US. This is due to the fact that flawed trading relationship between US and China makes millions of people had lost their manufacturing jobs in the US (Scott, 2018). Additionally, he asserted that China has been practising unfair trading practices such as dumping, discriminatory non-tariff barriers, forced technology transfer, over capacity and other policies that harm companies in the US and the world (Trump, 2018).
According to World Intellectual Property Organization (WIPO), “The IP system aims to foster an environment in which creativity and innovation can flourish” and therefore people are encouraged to earn recognition and financial benefit of their invention or creation which protected by law (WIPO, 2018). Tariffs worth of US$50 billion has been imposed for Imports from China as a punishment of stealing the US intellectual property. It is imposed on a wide range of goods, from the electronics materials to the tennis shoes (Clark & Hagan, 2018).
Moreover, Donald Trump not only accused China on stealing US intellectual property but also labelling them as “the greatest theft in the history of the world” because of their unfair business practices and depicted it as “rape” to the US (BBC, 2016). Not only that, a 53-page report has been issued by US trade Representative accusing China as an intellectual property and technology theft which later being investigated by the World Trade Organization (WTO) (Donnan & Leonard, 2018).
For the US, these tactics that China has been developing are discriminatory treatment of foreign investment, intellectual property theft, forced technology transfer and cyber espionage. Accordingly, the US government levies tariffs on Chinese goods and block some of some Chinese acquisitions (McBride, 2018). The first tariffs worth of $37 billion were first imposed in March 2018 and it is responded by China in the next month (BBC, 2018). The detail of the US-China trade war can be clearly explained by the timeline below:
Date Joint Action US Action Chinese Action
1/22/2018 US imposes safeguard tariffs on washing machine and solar cell imports. While much of these imports don’t come from China, the statement makes clear that Chinese dominance of the global chain was a concern.
2/4/2018 China starts a one-year anti subsidy investigation into sorghum imported from the US.
3/9/2018 Trump signs tariffs on imported steel and aluminium from all nations, including China.
3/22/2018 US proposes tariffs in response to China “unfair trade practices” related to technology transfer, IP, and innovation; says it will complain to WTO and look at restricting investment from China.
3/23/2018 US complains to WTO about Chinese protection of IP. China unveils tariffs on $3 billion of US imports in response to steel and aluminium tariffs.
3/27/2018 US release Section 301 report on China
Early April Liu He tells other officials that trade talks between the two parties broke down after US demanded that China curtail support for high-technology industries. Beijing had offered to cut the bilateral trade by $50 billion
4/2/2018 China says it will start levying tariffs on $3 billion of US. Imports including fresh fruits, nuts, wine and pork.
4/3/2018 The US releases a list dominated by high-tech industrial products as targets for proposal tariffs on $50 billion worth of imports. This aimed at recouping losses from China’s alleged abuse of intellectual property.
4/4/2018 China says it will levy an additional