As the world economy is struggling to cope up with various pulls and pressures, a new challenge has emerged after the US and China have engaged in a war of words over US President Donald Trump’s threat to raise tariffs on USD 200 billion worth of goods that China is supposed to export to the country.
China has threatened to retaliate if US President Donald Trump raises the tariffs ahead of the crucial 11th round of talks aimed at ending the trade war between the world’s two largest economies. The talks are due to be held today and tomorrow in Washington between trade delegations headed by Chinese Vice Premier Liu He and US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin.
The meeting had to be organized as US accused Beijing of backtracking from consensus reached on key issues in the earlier rounds of talks. The US leadership has announced to raise tariffs on USD 200 billion worth of Chinese goods from 10 per cent to 25 per cent as of May 10 in a bid to pile up pressure on China to conclude the talks to end the trade war at the earliest.
The US and China are locked in a trade war since Trump imposed heavy tariffs on imported steel and aluminum items from China in March last year, a move that sparked fears of a global trade war. In response, China imposed tit-for-tat tariffs on billions of dollars worth of American imports.
China is under pressure as its bilateral trade volume with the US, which is second largest trade partner of the European Union (EU), fell by 20 per cent in the first four months of this year.
Data – released by the General Administration of Customs (GAC) in Washington just yesterday mentioned that from January to April, the trade between the two countries was 1.1 trillion yuan (USD 173 billion), down from 20 per cent in 2017 prior to they engaged in a tit-for-tat trade tussle last year.
But at the same time, China’s trade surplus with the US, one of the main grievances of the US administration against China, expanded 10.5 per cent to 570.2 billion yuan (USD 84.17 billion) during the period.
Trump is demanding China to reduce the USD 375 billion trade deficit. He also called for verifiable measures for protection of Intellectual Property Rights (IPR), technology transfer and more access to American goods in the Chinese markets.
The US move to increase tariffs from 10 per cent to 25 per cent, the bilateral trade is poised to tumble further, inflicting deeper wounds on the two sides and claiming collateral damages on others.
This does not augur well for the world economy as countries like growing economies like India too will feel the heat.
US has already notified India that it is planning increased tariffs on the products it is importing from the country. President Donald Trump had taken a swipe at India along with the world’s other top economies and accused New Delhi of charging 100 per cent tariff on some of the US’ goods, as he threatened to cut trade ties with countries who are robbing America.
The new US trade policy stresses on achieving maximum gains for itself, however, the country’s policy of choking smaller countries will spell doom for the world economy which no one can afford.