Economy

Deteriorating Trade Relations Between the US and China amidst the pandemic

Donald Trump clearly affirmed that any advantages from the U.S-China trade deal could be meaningless when compared to the pain inflicted by the pandemic from China.

Thus far, the heightened tensions have not impacted the phase -1 of January trade deal.

 But, the message comes as the Trump-led administration is ratcheting up the bitterness with Beijing ever since the coronavirus penetrated into the US causing pandemonium. 

Shooting up tensions between the two countries:

White House officials last week informed to media that Chinese corporations could suffer sanctions due to the untrustworthy actions of the Chinese government handling the pandemic. Trump led government seriously deeming to stop federal retirement investments in Chinese companies which could present a substantial threat to US national security and confirmed that it would potentially examine other useful options to invest the money in a productive manner and recent Hong kong legislation by China irked US to great extent leading to keeping the trade deal inactive.

Recently they temporarily resisted from equity investments up to 4.5 Billion USD which was supposed to be invested in Chinese equity markets.

Phase 1 of the trade deal components comprising of

A datasheet publicized by the USTR outlines the key areas of concerns to be  addressed by both the countries after the Pact includes

Currency: A long-term standing issue that would defy China from undervaluing its currency to achieve a robust trade advantage.

Broadening Trade: China to import $200 billion worth US products additionally to cover the trade deficit.

Macroeconomic Policies and Exchange rate matters and transparency.

Intellectual Property Rights: Enforcement of IPR ensures in protecting patents, rights of US technologies and innovations without any vulnerabilities, preventing theft,  plagiarism or unauthorized usages.

Establishing balance on agricultural trade policies between two countries,

Liberalising Financial Services

Bilateral evaluation and Dispute Resolution: The pact also includes establishing a dispute resolution system.

Trade statistics between the US and china

Image Source: statista

The U.S. goods trade deficit with China was $378.2 billion in 2018.

U.S goods and services trade with China amounted to an estimated $737.1 billion in 2018. Exports accounts to USD 179.3 Billion and Imports accounts to 557.9 Billion (Sourced from the office of USTR Official website ).  

Image Sources: Peterson Institute for International Economics research data

Long Road ahead for both the countries

China has earmarked to $77.7 billion in further manufacturing buys, USD 52 Billion in energy supplies and USD 37.6 Billion purchases from US companies to narrow trade deficit in coming years. The U.S. taxed 25% on $250 billion value of Chinese goods, while status quo promptly remained unchanged. It was about to be relaxed after phase-2  negotiations which has become a  distant reality.

Trade deal conflicts 

Despite intransigence and intense trade wars between US-China over these years, the trade deal between China and the US was touted to be more be successful between both nations despite not so great transactional relationships. But, adding more woes to the economic deterioration, the pandemic made this deal difficult to kick-off between the two influential nations. 

China retaliating with the US after Donald Trump’s tough posturing to dictate the deal and confront with chinese peers in the most difficult manner leading to more hostility.

Now CCP controlled Chinese government planning to halt buying soya beans and outputs from US agriculture market, which is the primary feature of Two-Hundred Billion dollars additional exports trade deal promised by China to the US. 

Beijing’s move, first published by Bloomberg News, pursued U.S. announcement that Washington will perhaps take strides consenting Hong Kong’s special status and conceivably levy sanctions and other economic impediments against both China conventional and the once-sovereign territory.

Economists believe that these confrontations and differences would be interpreted based on US electoral Calculus and rely on sentiments rather than genuine trade policies and advantages. Trade experts also reiterate that Trump’s pre-emptive moves are dominating Democratic presidential nominee Joe Biden and outcompete his narrative against China.

About the author

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Anand Raghavan

About the author : Electrical Engineer with deep passion towards AI & deep learning. Also an avid writer who likes to research & write about Geo-politics of US & China. Passionate about  free markets & foreign trade . Get to know more about me on Twitter @anandaragavan

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