US - China Trade war -The pause - Seeker's Thoughts

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Tuesday, 4 December 2018

US - China Trade war -The pause

Introduction- In the multipolar world there remains a struggle to stay strong and powerful. The world is no longer dominated by two powerful nations US, and USSR. Today the power struggle remains between multiple countries like US and China are also locking horns against one another.

What is a trade war?
A situation in which countries try to damages each other's trade typically by the imposition of tariffs or quota restrictions. Going through history- one of the most famous examples of US protectionism came during the great depression after world war 1. Domestic US businesses faced increased international competition, as well as declining prices due to overproduction. When the stock market crashed in 1929, domestic businesses largely supported the protectionist measure and in 1930, President Hoover signed the Smoot Hawley tariff act.

Recent Development: US- China Conflict
America and China are two among the powerful countries in the world. Both of them have massive economic, political and military capacities that allow them to project power and influence around the world. The US has been the leading world  power on the other hand China is nowhere considered less powerful nation either. China embarked on three decades of unprecedented economic growth and modernization as well.
America imposed Aluminum and Steel tariffs in early March,2018 in order to protect its own industries. Some other tariffs imposed by  the U.S were in the field of aerospace, information and communication technology, and machinery.
After all tariffs imposed by  the USA, China placed import duty on a wide range of US product. including scrap aluminium ,wine and apples.
The US again imposed tariffs on about 1,300 Chinese products .
 Later China came out with more tariffs this time taking aim at Boeing planes.America was entertaining the idea of another 100$ billion in tariffs.

Impacts of the Conflict
Trade war had never been productive for nations in human history. The world is already at stake where constant crisis of Iraq, Syria, Afghanistan and another region of African nations keeps on shaking the economic growth. Open borders have helped in poverty alleviation since globalization.

The Pause 

The G20 meeting in Buenos Aires, In November 2018
The U.S. and Chinese Presidents, Donald Trump and Xi Jinping, agreed to a 90-day truce. The two countries will try to find an amicable solution to the various problems plaguing bilateral trade relations, such as disputes over intellectual property rights and Chinese state support for domestic industries, through talks over the next three months. Meanwhile, the U.S. will refrain from raising the tariff on Chinese goods worth $200 billion from the current rate of 10% to 25% on January 1, 2019, as planned. In return, according to the White House, China will purchase agricultural and other goods from the U.S. in order to reduce the trade imbalance between the two countries. If talks fail, however, increased tariff rates are scheduled to come into force immediately.

Uncertainty 

Both countries should come to one platform and negotiate. Imposing tariffs by both the countries can create economic chaos worldwide.
It would impact every nation as world bank has warned that the effect of the increased use of tariffs to regulate international trade could be similar to the significant drop in global trade after the financial crisis.
The ongoing trade war remains a lose-lose situation for the warring parties. The only winner will be special interest groups and consumer in countries that do not engage in the tit - for- tat tariff war,but their winning will come at the cost of global growth. 
This is right decision to pause the conflict, yet there is factor of uncertainty. It is high time countries worldwide come together to promote the cause of free trade.