Trade War Between the US and China

Trade War Between the US and China

The trade war between the world's two largest economies, the United States and China, has entered a new phase.
In response to the tightening of trade restrictions by the Donald Trump administration, China has retaliated with symmetrical measures, imposing tariffs on American goods and restricting the activities of several US companies.
This move marks another episode in a long-standing confrontation that began several years ago and continues to impact the global economy.

Trade War Between the US and China

China's Response to US Actions

On Tuesday, the Chinese government announced the introduction of additional tariffs on American goods.
The Ministry of Finance of the People's Republic of China stated that a 15% tariff would be imposed on products such as chicken, wheat, corn, and cotton. Tariffs on soybeans, sorghum, pork, beef, fruits, vegetables, and dairy products will amount to 10%.

These measures directly affect American farmers, who are already facing difficulties due to previous restrictions.

Additionally, China's Ministry of Commerce added 15 American companies to its export control list and included 10 firms on its list of unreliable entities.
One of the most notable companies affected is Illumina Inc, which is now prohibited from exporting gene-sequencing equipment to China.
These measures will take effect on March 10 and could significantly impact the business of American companies reliant on the Chinese market.

Reasons for Escalation

China's retaliatory actions came in response to the Trump administration's decision to raise import tariffs on Chinese goods from 10% to 20%.
Donald Trump stated that such measures were necessary to pressure Beijing into stopping the flow of illegal substances, particularly fentanyl, into the United States. Additionally, Trump imposed 25% tariffs on goods from Canada and Mexico, urging these countries to strengthen border controls.

This is not the first time the US and China have engaged in a trade confrontation.
In February 2023, Trump introduced 10% tariffs on Chinese goods, to which Beijing responded with similar measures.
However, the current round of restrictions indicates a serious escalation of the conflict, which could have far-reaching consequences for the global economy.

Historical Context

The trade war between the US and China began in 2018 when the Trump administration first imposed tariffs on Chinese goods.
The primary reasons were the US's desire to reduce its trade deficit with China and to halt practices such as intellectual property theft and forced technology transfers. In 2019, the two sides signed a temporary agreement, which somewhat eased tensions but did not resolve the underlying issues.

Since then, relations between the two countries have remained strained. China, on one hand, seeks to protect its economic interests, while on the other, it aims to avoid a full-scale conflict that could slow its economic growth. The US, meanwhile, continues to insist on changes to China's trade policies, creating grounds for new disputes.

Economic Consequences

The escalation of the trade war is already impacting both economies. China, facing increased tariffs, is preparing to implement additional measures to stimulate domestic demand. New business and consumer support programs are expected to be announced at an upcoming government meeting.

The consequences for the US could also be significant. American farmers, already affected by previous restrictions, will face even greater challenges. Moreover, companies reliant on the Chinese market may lose a substantial portion of their revenue.

The global economy is also feeling the effects of the conflict. The trade war between the US and China is creating uncertainty in global markets, which could lead to reduced investment and slower economic growth in other countries.

Possible Scenarios

In the coming months, the two sides are likely to continue negotiations aimed at reaching a new trade agreement. However, achieving a compromise will not be easy. China insists on the removal of restrictions and respect for its economic interests, while the US demands significant concessions in trade policy.

Some experts believe the conflict could drag on, leading to further fragmentation of the global economy. Others think the two sides may find common ground, as they did in 2019.

Conclusion
The trade war between the US and China remains one of the key factors influencing the global economy.
The escalation of the conflict, manifested in new tariffs and restrictions, creates additional risks for both countries and their trading partners. In the near future, attention will be focused on negotiations between Washington and Beijing, the outcome of which will largely determine the future of global trade.

However, even if a temporary agreement is reached, the underlying issues in the relationship between the two countries will persist.
This means that the trade confrontation could continue in one form or another, exerting a long-term impact on the global economy.
FX24

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