The world is moving towards an imminent trade war between the world’s two largest economies US and China, with China’s Foreign Minister Wang Yi saying that China will make a necessary and justified response to US President Donald Trump’s protectionist measures. Notably, Donald Trump said that duties of 25 percent on imported steel and 10 percent on aluminum will apply to protect domestic producers, drawing strong criticism from its trading partners.
Further, relating specifically to China, Trump has demanded the country to lay out plans for reducing its trade surplus with the United States by $1 billion. Donald Trump tweeted, “China has been asked to develop a plan for the year of a One Billion Dollar reduction in their massive Trade Deficit with the United States.” According to a Reuters report, China had a trade surplus with the United States amounting to $375.2 billion.
If China retaliates, United States’ position may be negatively impacted say experts. Notably, China is a major importer of US soybeans, maize and meat. If the country decides to shifts these purchases to other countries, US farm producers will be impacted. Further, China imports a lot of aircrafts from Boeing, and may shift to Europe’s Airbus. Moreover, the country may also retaliate by selectively targeting US pharma companies.
However, China’s Wang Yi said that China and the United States did not have to be rivals. “Especially given today’s globalisation, choosing a trade war is a mistaken prescription. The outcome will only be harmful,” Wang Yi said on the sidelines of an event adding that China China has a long way to go on its path of modernisation, and will not and need not displace the United States.
Earlier, US President Donald Trump said that retaliation from players such as the EU will not hurt them, adding that trade wars are good, and ‘easy to win.’ Interestingly, trade tensions between the US and China have been on the rise especially after Donald Trump took office in 2017. Even though China accounts for a small fraction of the total steel imported by United States, the country’s industry expansion has led to a global glut of steel leading to reduced global prices. According to a Reuters report, Donald Trump is also considering potential trade sanctions against China under a “Section 301” investigation into its intellectual property practices and pressure on foreign companies for technology transfers.