China-US Trade War

US-China Trade Talks: Key Points and Updates

US-China Trade Talks: Key Points and Updates

US-China Trade Talks: Key Points and Updates

Trade discussions between the US and China are expected to take place on April 30th, 2019, in China’s capital of Beijing, after a long period of imposed tit-for-tat tariffs on billions-worth of both Chinese and American goods. Robert Lighthizer, the United States Trade Representative and Liu He, the Vice Premier of China will attend the trade talks. The talks will attempt to bring an end to the trade war between the world’s largest economies and to establish their future relationship.

Indications from the US and China suggest that advances have been made regarding intellectual property theft and technology transfers.

Events leading up to the current affairs between the US-China trade war:

  • Following allegations from the US that China had been conducting one-sided trade practices, President Trump slapped on tariffs of around 250 billion dollars’ worth of goods imported from China.
  • China then countered this by imposing tariffs on imported US goods worth over 100 billion USD.
  • The US scheduled a 15 percent increase on the tariffs for Chinese goods by the beginning of 2019, but the two nations agreed to freeze the tariff increases as they approached the negotiating table to try and reach a conclusion.

President Trump is pushing for a well-rounded deal that will outline the future trade relationship between the US and China. During an announcement from the White House President Trump said:

“We want to make it comprehensive; we want to make a deal that we can look at and be proud of for many years, not where we have to go back and renegotiate where we left things out.”

Taken from Youtube.com

Some critics suggest that due to geopolitical pressures, especially with the US’s removal of sanctions waivers on countries that import crude oil from Iran, which includes China, it could be difficult for enforcement measures to be rooted into a deal and maintained thereafter.

On April 28th, Steven Mnuchin, US Treasury Secretary, told The New York Times: “We’re getting into the final laps […] I think both sides have a desire to reach an agreement, we’ve made a lot of progress.

The United States has accused China of intellectual property theft and is requesting that China’s policies regarding its economy and the way it carries out trade with other nations need to be reformed.

President Xi referred to a number of the accusations during the Belt and Road summit in China on the 26th of April saying that China would make strong efforts to improve both the security of intellectual property and the trade policies in order to facilitate fairer trade practices.

US-China Trade War

What are the repercussions of the trade war?

The tariff war between China and the US is affecting the global economy as a whole.

The IMF’s (International Monetary Fund) Economic Counsellor and Director of the Research Department, Gita Gopinath on the 9th of April said the following:

A year ago, economic activity was accelerating in almost all regions of the world. One year later, much has changed. The escalation of US–China trade tensions, needed credit tightening in China, macroeconomic stress in Argentina and Turkey, disruptions to the auto sector in Germany, and financial tightening alongside the normalization of monetary policy in the larger advanced economies have all contributed to a significantly weakened global expansion, especially in the second half of 2018.

After the weak start, growth is projected to pick up in the second half of 2019. This pickup is supported by significant monetary policy accommodation by major economies, made possible by the absence of inflationary pressures despite growing at near potential. The US Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England have all shifted to a more accommodative stance. China has ramped up its fiscal and monetary stimulus to counter the negative effect of trade tariffs. Furthermore, the outlook for US–China trade tensions has improved as the prospects of a trade agreement take shape.

Read the full IMF article here.

Similarly, the OECD (Organization for Economic Cooperation and Development suggests that:

“Overall, recent economic and financial developments, and the materialization of some downside risks, suggest that global growth prospects have eased since the November Economic Outlook, especially in Europe. Global GDP growth is projected to slow from 3.6% in 2018 to below-trend rates of 3.3% this year and 3.4% in 2020, with downward revisions in most G20 economies.”

Economists and analysts were concerned with the fact that the general health of the world’s economy could struggle under the pressure from the US-China trade dispute. The drastic rise in tariffs from both nations has seen export figures in China plummet to levels last recorded over ten years ago. Similarly, Germany, Europe’s largest economy, has seen a crash in manufacturing figures which then impacts Gross Domestic Product results.   

The trade deficit for the US exceeded 600 billion USD last year, with export figures dropping to just below 2 percent whereas import numbers increased by just over 2 percent.

Since the Trump administration imposed hefty tariffs on billions’ worth of Chinese imports the USD has risen by over 2 percent which ultimately increased the price of imported crude oil as it is priced in dollars. 

Beyond 2020, global growth is expected to stabilize at around 3½ percent, bolstered mainly by growth in China and India and their increasing weights in world income. Growth in emerging market and developing economies will stabilize at 5 percent, though with considerable variance as emerging Asia continues to grow faster than other regions. A similar pattern holds for low-income countries with some, particularly commodity importers, growing rapidly but others falling further behind the advanced world in per capita terms.

Taken from the IMF blog.

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