US-China Trade War and trade deficit of US

The US has unsuccessfully waged a trade war against China, but deficits keep rising

 US-China Trade War and trade deficit of US

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• The story: It was America that helped China join the World Trade Organisation in December 2001. It has never imagined that the exports engine of China would roar so loudly, drowing all others in its wake! With time, China's exports to the US rose steadily, and the deficits became a sore point in the bilateral relationship.
• Presidential approach: While both George Bush and Barack Obama warned China on this, it was with Donald Trump that concrete action was taken. A proper trade war was unleashed in 2018, with rising tariffs against Chinese imports into the US. The goal was to sharply cut trade deficits. Today, data shows that the trade-and-technology war between the US and China that began in 2018 has hardly made a reduction in US trade deficit.
• How it started: In 2018, US President Donald Trump unilaterally imposed a 25 per cent tariff on Chinese imports of around $34 billion and further tariffs in 2018 and 2019. He accused China for “unfair trade practices” and “technology theft”. The trade war was continued by the administration of President Joe Biden and was morphed into a technology war. The US has denied China both the knowledge and inputs for producing frontier goods and services as well as access to markets, affecting semiconductor production and 5G technology.
• American worries: These include deficits and technology.

1. US deficits - First is the trade deficit. The broader context of the trade war was the growing merchandise trade deficit of the US which was $735 billion in 2016. Then came pandemic reliance. Imports into the US from China in the first half of 2021 were on average 46% higher than in the first half of 2020.
2. Tech dominance - Hi-Tech imports rose. A concern of US trade policy with regard to China is the growing significance of high-technology imports. U.S restricted China’s access to semiconductor chips that are essential for new 5G-enabled smartphones. Sanctions were imposed on Chinese telecom giants ZTE and Huawei for alleged espionage and ties to the “techno-authoritarianism” of the Chinese state.

• What next: The aggressive strategy by the US is putting the economic territory of the future (whether in the form of communication technologies like 5G or renewable energy solutions) at risk. The trade war has hardly made any reduction on US trade deficit. The macroeconomic processes within the US that were likely to generate trade deficits have to be looked upon rather putting the blame on China.
• Biden's approach: He has not diluted the Trumpian aggression, given his own domestic political concerns. In addition, Biden is doubling down on geopolitical pressure on China, with new alliances like the AUKUS security alliance with UK and Australia. He has also started building global diplomatic pressure via efforts to build a coalition of democracies.
• EXAM QUESTIONS: (1) Explain the reasons America was not able to reduce its trade deficits with China. (2) What geopolitical levers can America now use against China, to cut its domination in trade? (3) Science and technology is identified by both US and China as the engine for future domination of world politics. Explain analytically.

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#geopolitics #exports #imports #trade #USA #China

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