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All you need to know about US and China trade war (Relevant for GS prelims, GS Mains Paper II)

Trade war with China: What

The U.S. and Chinese governments issued competing announcements recently, each hitting $50 billion of the other’s products with tariffs. Here’s what you need to know about the ongoing trade dispute.

The U.S. and China are going for tit for tat. Initially U.S. released a list of 1,300 products from China that it could hit with tariffs, totaling about $50 billion in trade. China imposed tarrifs on 106 products it imports from America, these products make about of the same figure of $50 billion.

Which are those products?

The products on the U.S. list include heavy machinery, motorcycles and high-tech items, such as semiconductors and batteries. Reuters calculates that the top five products affected are color TVs, cars, copier parts, aluminum alloy plates and hard drives.

China’s list names cars, aircraft, soybeans, corn, sorghum, whiskey, beef, tobacco, cotton and plastic products.

How did the trade war begun?

These proposed tariffs would be Round 2 of the mini-trade war that has already begun: The U.S. last month announced tariffs on imports of steel and aluminum, in part targeting China.

In response, China on Sunday slapped tariffs on $3 billion on agricultural products from the U.S. including hog parts, wine, fruit and nuts.

The U.S. is targeting China for unfair trade practices and the trade deficit. The U.S says China treats American companies unfairly by restricting access to its markets and stealing proprietary technology. The U.S. buys $506 billion worth of goods from China but only exports $130 billion, leaving a trade deficit of $375 billion between the two countries.

President Donald Trump has said that China must shave $100 billion off that goods deficit.

The U.S. companies most at risk include Boeing, which last year sold one-fourth of its commercial airplanes to China, and several car makers. Also at risk are foreign firms that produce in the U.S. Germany-based BMW sends 89,000 vehicles annually from the U.S. to China, the Associated Press reported, while Daimler AG’s Mercedes-Benz ships 65,000.

China’s tariffs, if enacted, would double the current levy on U.S. cars, to 50 percent.

U.S. farmers, too, stand to lose their biggest trading partner. The U.S. is the second-largest supplier of soybeans to China, after Brazil, and soybean farmers last year sent $14 billion worth of the crop to China. Soybean prices fell to their lowest level in two years on Wednesday after China’s list came out, Bloomberg reported.

One industry that was spared is apparel. Nearly all clothing sold in the U.S. — 97 percent — is imported, and China is the top import partner by far, responsible for 41 percent of U.S. imports. Industry groups had lobbied hard against the tariffs, pointing out that imports of clothing are already heavily taxed at the border.

“We pay the highest tariffs on average of any product,” Steve Lamar, executive vice president of the American Apparel and Footwear Association, told CBS MoneyWatch last week. “We represent 6 percent of the imports but account for 51 percent of the tariffs.”

Chances that this may not happen

This could mostly fizzle out, as both the U.S. and Chinese tariffs are still only in the proposal stage. “Nothing concrete has actually happened; these are proposals,” Trump economic adviser said. The public has until May 11 to submit comments on the proposed list of U.S. tariffs, with a hearing scheduled for May 15.

(Adapted from www.cbsnews.com)

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