A short explainer on the trade war between the U.S. and China.
U.S. trade in goods with China
(latest info, as of November 2018, sourced from www.census.gov, a U.S. government website)
- Imports from China: U.S.$493.49 billion
- Exports to China: U.S.$111.16 billion
- Trade Balance: minus (–)U.S.$382 billion
The U.S. accuses China of high tariffs (taxes) on American products, which make them expensive for the Chinese to buy.
Also, Washington has accused Beijing of doing nothing to prevent theft of intellectual property rights (like counterfeit goods and pirated software) and stealing of trade secrets (including through corporate espionage or by breaking into computer systems of American companies to gain access to cutting-edge technologies). The U.S. estimates the damages from China’s bad behaviour at around $600 billion.
Tariffs & Impact
To punish China for its bad behaviour and inaction, the U.S. imposed high tariffs on around Chinese goods (like handbags and heavy machinery) with $250 billion. Tariff increases ranged between 10% and 25%.
China hit back with $110 billion in tariffs on American goods.
The U.S. has postponed imposing another of tariffs on Chinese goods (worth $200 billion) as negotiations are underway to broker a better trade deal.
As of today, the Chinese have agreed to buy more American goods, especially agricultural products (like soybean). Farmers are among the major vote banks of Donald Trump. However, to push Trump to buckle down, China has imposed higher tariffs on goods (like coal and chemicals) made in Republican strongholds.
Beijing has also agreed to reduce tariffs on some American products to help those products gain wider market access.
Tariffs (taxes) on Chinese goods would make American products cheaper (comparatively) in the home market. This would induce Americans to buy more American goods (and not expensive Chinese goods).
China’s exports to the U.S. make for nearly 25% of its total exports. A drop in its exports to the U.S. could harm Beijing a lot more than it is willing to admit; of course, bragging aside, Beijing knows that a drop in exports to the U.S., especially amid a slowdown in its economic growth, could lead to industrial contraction, higher unemployment, and social unrest.
Both the U.S. and China have dug in their heels, though both countries cannot afford to do that for a long haul. Washington and Beijing are waiting for the other to blink, though both parties are staring at each other.