US-China Trade War

Key Highlights

• According to a report by the UN Conference on Trade and Development (UNCTAD), of the USD 250 billion in Chinese exports that are subject to US tariffs, only about six per cent will be picked up by firms in the US.
  
  
• And of the approximately USD 85 billion in US exports that are subject to China’s tariffs, only about five per cent of this will be taken up by Chinese firms.
  
  
• The report said that unless the US and China agree to drop their tariff dispute by March 1, duty on each country’s products will rise to 25 per cent, up from the current 10 per cent level.
  
  
• According to the report, countries that are expected to benefit the most from the trade war are the EU members as exports in the bloc are likely to grow by USD 70 billion.
  
  
• Japan and Canada will see exports increase by more than USD 20 billion each.
  
  
• Other countries set to benefit from the trade tensions include Australia, with 4.6 per cent export gains, Brazil (3.8) India (3.5), Philippines (3.2) and Vietnam (5).
  
  
• The UNCTAD report also warns that the spat could hit East Asian producers the hardest, with a projected USD 160 billion contraction in the region’s exports unless discussions between China and the US are resolved before the March 1 deadline.
  
  
• The report highlighted the major concern that the ongoing trade tensions could spiral into currency wars, making dollar-denominated debt more difficult to service.
  
  

Background:

• The US and China are locked in a trade war since President Donald Trump imposed heavy tariffs on imported steel and aluminium items in March 2018.
  
  
• In response, China imposed tit-for-tat tariffs on billions of dollars worth of American imports.
  
  
• In a bid to meet the US’ demand of bringing down the USD 375 billion bilateral trade deficit, China has pledged to take measures to step-up American imports and investments.
  
  
• March 1, 2019 is the deadline for implementing the measures.