Trade War: An Infinitesimal View
In the post Cold War era, the US changed its policies, shifted its priorities and viewing China’s economic emergence as a great threat to its interests in coming decades. With a rapid economic growth, technological advancement and development of its armed forces, China became a future competitor of the US. Due to Chinese rapid economic growth, modernization of its armed forces as well as mounting position in Asian region and sea lanes of transportation, many American analysts take China as its future contestant. As a result, China remained a factor in the US all grand strategies. The ‘China versus the US’ indicate that Washington is taking potent steps against its threat (China). China perceives these steps as a part of the US policy of “hedge” to contain “the mighty China”. This writing tries to examine the ongoing trade war between the US and China in miniature view and suggest the options for China.
Trade wars have finally begun between the US and the China. Before little explanation of this Trade war, let’s discuss the concepts. A trade war is when a nation imposes tariffs on imports and foreign countries retaliate with similar forms of trade protectionism. It is side effect of protectionism that occurs when one country (country A) raises tariffs on another country’s (country B) imports in retaliation for country B raising tariffs on country’s A imports. Besides this, a tariff is a tax imposed on imported goods and services. Trade wars also commence if one country perceives another country’s trading practices to be unfair. Trade wars are also a result of a misunderstanding of the widespread benefits of free trade. In addition, a tariff is a tax or duty that the government places on a class of imported goods (tariffs on exports are very rare). In theory, this makes the foreign products more expensive and therefore less desirable to consumers-boosting domestic makers of the product, which don’t have to pay the tax. The tariff is collected by customs officials and goes to the government. In addition, Protectionism refers to government actions and policies that restricts or restrain international trade, often with the intent of protecting local businesses and jobs from foreign competition.
The United States and China have imposed a tariff of 25% on imports worth $34 billion after exchanging several threats over the last few months. This marks the official beginning of what China dubs as “the biggest trade war in economic history”. While this trade war is far from the biggest the world has seen, it has the potential to cause some significant damage to the world economy. US President Donald Trump, who began the year by imposing tariffs on imported solar panels and washing machines, has vowed to possibly tax all Chinese imports into the US, which last year added up to a little over $500 billion. President Trump’s tariffs against China will likely resonate with voters who believe in his “America First” campaign and perceive the trade deficit with China as a loss to the US economy. China, not surprisingly, has responded by targeting American exports like soybean and automobiles, a move that could cause job losses in American states that accommodate Trump’s voter base. Other major US trading partners such as the European Union, Mexico and Canada have also slapped retaliatory tariffs on various US goods. On July 06, 2018 the Chinese products $34 billion worth, including goods, flat-screen televisions, aircraft parts and medical devices have faced tariff imposed by Trump administration. .The goods marked for tariffs will now face a punishing 25 percent border tax when they are imported into the US. The Trump administration initiated these tariffs after concluding an investigation into some of China’s ‘controversial trade practices’. The main motto behind the new trade barriers is to penalize China for doing things like forcing foreign businesses to hand over their most-prized technology to Chinese companies – many of which are state-owned – in exchange for access to their market. China immediately accused the US of starting “the largest trade war in economic history to date” and responded by imposing 25 percent tariffs on $34 billion worth of US goods, including soybeans, automobiles and lobsters. According to a spokesperson for China’s ministry of commerce, after Minutes the US tariffs went into effect,
“China promised not to fire the first shot, but in order to safeguard the country’s core national interests as well as those of the people, it is forced to fight back … the US will be opening fire on the whole world and also opening fire on itself.”
Additionally, the state-run Global Times wrote,
“If what the US wants is to escalate a trade war with China, then so be it. A little fighting may be the only way the Trump administration clears its mind and allows everyone to sober up.”
The aggregate amount of trade affected is moderate relative to the US and Chinese economies, but for the US, this is the most extensive import protection since the disastrous Smoot-Hawley tariffs in the 1930s. President Trump has threatened a 10 percent tax on a further $200 billion of imports from China.
In the context of feasible effects on global economy, the trade war between the US and the China could push the world economy towards a decline and it could lead to a collapse of comprehensive as well as global trade. The deteriorate investment, disturb financial markets and sluggish global economy are the major negative outputs of this trade war. This trade warfare between the US and China could extend to worldwide in trade arena and to areas beyond trade. According to economical analysts, the trade conflict among one superpower and other rising power can create disturbance of global supply chains. In addition, the US products which are assembled in third world countries can also be affected. Without a doubt, due to the disturb supply chain, the US consumer could well end up paying higher costs for products. At the end but not least, this trade confrontation between two rivalries of 21st century could affect the world trade system and it could be trade cold war between both countries be like the cold war between USA and the USSR in 20th Century. A thoroughgoing trade war could lead to a collapse of global trade.
Additionally, this trade war could also effects Chinese economy, With the Dawn of 21st century, People’s Republic of China is in a very fair position in the context of Economy to face any economic tornado because in general, its economy is less dependent on exports, and exports to the US in particular. The value added in its exports to the US is less than 3 percent of its economy. In addition, China is at the end of many global value chains, which include inputs from the US, Japan, South Korea and Taiwan. The Shanghai stock market is in main territory, down 23 percent from a high in January 2018. Still, the trade war comes at a bad moment in China’s cycle. The establishment have been tightening financial conditions and trying to restraint in financial risks, so that the economy is slowing, even before it takes a hit from trade. The Chinese currency has depreciated round about 4.3 percent against the dollar for the last past few months.
This is a natural market reaction to the US protectionism. Over the same period, the dollar has appreciated about 5 percent against a basket of major currencies. This is one of the ironies of the US which is trying to use trade taxes. They create uncertainty in the world and one result is that capital flows out of other economies to the US. In the short run, this raises the value of the dollar and largely undoes the protection. Historically, when the US introduces protection, it has typically not led to an improvement in the trade balance, rather the opposite. In the case of US-China trade, 25 percent tax means that about $50 billion of imports will be more expensive, and the US is likely to import less. But the other $500 billion that the US imports will be modestly cheaper because of depreciation and the US will import more. History suggests that the net effect on the trade balance will be minor. This is one reason that the direct effect on the Chinese economy is likely to be minor.
In addition, the effect of this trade war could be on the US economy. The US economy is humming along because of fiscal stimulus from tax cuts plus expenditure increases. Net job gains in June, 2018 were above 200,000, the pattern of recent months. In general, the trade war will destroy some jobs in export sectors and create some jobs in import-competing ones. This is a bad tradeoff because export jobs are generally of higher productivity and pay. The job churning is also disruptive — the lost jobs are likely to be in agricultural states and southern states with auto plants, whereas job gains are probably elsewhere. The Trump White House is betting that, given the overall strength of the economy, some localized pain will be tolerable and the get-tough policy toward China will be a political winner for the midterms. Economically, both the United States and China would lose from a trade war. Punitive tariffs would push up import prices, dent exports, cost jobs and crimp economic growth, so both sides would do best to avoid an outbreak of hostilities.
Here some options for China to retaliate this trade war. In this trade war with China, President Donald Trump wields one seeming advantage: the US could ultimately slap tariffs on more than $500 billion in imported Chinese goods. Beijing has much less to tax: It imported just $130 billion in US goods last year. Yet that hardly means China would be powerless to fight back once it ran out of US goods to penalize. It possesses a range of other weapons with which to inflict pain on the US economy. Here is a look at some of the options China has in this war:
The Chinese government should do trade in local currency. The visit of Pakistan’s Prime Minister Mr. Imran khan Niazi to China give very valuable and authentic suggestion to Chinese government to do trade with Pakistan in Yuan rather than the US dollar $. It will be a direct and indirect hit to the US, her fellows and dollar $ currency. After the successful agreement with Pakistan, China could do trade with other countries in Yuan. Be remembered that China is a chief exporter country of the world with 2263 trillion dollar $. In addition, recently China gives defeat to the US in the context of purchasing oil and makes herself as chief and main oil importer and customer of the world. China could do trade with KSA, KUWAIT, IRAQ, IRAN, QATAR and other oil producing countries in Yuan but the US don’t want this. If the China would successful to do trade with oil producing countries in Yuan than the dollar will decrease its worth and market value at least. The US impose sanctions on European companies to do trade with Iran and other oil producing countries but reciprocally the European countries give intimidation to boycott the US dollar. In addition, Russia would play vital role as recreationist and would give Red carpet to all. This downfall of dollar will make crash in World Bank and IMF also. Chinese government this step would create a greatest tension for the US and dollar.
China should do check and balance regarding the US companies in China. China’s state-dominated and heavily regulated authorities could disrupt the US companies by withholding licenses or launching tax, anti-monopoly or other investigations. Chinese controlled media should play vital role. The state-controlled media have encouraged consumer boycotts against Japanese, South Korean and other international products Last year, Beijing destroyed Korean retailer Lotte’s business in China after the company sold land in South Korea to the Seoul government for an anti-missile system opposed by Chinese leaders. Beijing closed most of Lotte’s 99 supermarkets and other outlets in China. Seoul and Beijing later mended their relations but Lotte gave up and sold its China operations.
To counter Trump’s “America First” approach, Beijing can appeal for support to US allies and other countries. Trump’s unilateral actions have allowed China to position itself as a defender of free trade despite its status as the most-closed major economy. That could help Beijing win over governments that have criticized Trump for acting outside the World Trade Organization. Chinese leaders have tried – so far without a major success – to recruit European and other governments as allies. More broadly, Chinese commentators have suggested Beijing also could disrupt diplomatic work over North Korea’s nuclear and missile programmes or other initiatives. But political analysts say that would risk setting back work Chinese leaders see as a priority.
In concluding remarks, No country can hope to impose tariffs without affecting its own trade and industry as well as economic interests in this contemporary world. Apart from disadvantage, countries that rely on foreign imports can be disturbed due to higher prices for goods, tariffs and supply chain of producers. So both the competitors of this globalized world, the US and China, are doing no good to their own economic fortunes by engaging in this tit-for-tat tariff battle after blamed each other for the ongoing trade warfare. According to the US Federal Reserve meeting the economic uncertainty, decline of private investment and delay of investment plans have been happened due to this trade war. Besides this, the economic giant China will also be equally affected. This current trade confrontation between the US and China also threatens the rules-based global trade order. It could also isolate the US, which has refused to settle differences through serious mediations, negotiations. If global trade tensions continue to simmer, it may not be too long before countries resort to other destructive measures such as devaluing their currencies to support domestic exporters. The world economy, which is on a slow path to recovery, can do without such unnecessary shocks.
China’s Game in the Arctic: A Tale of Deception?
In the past years, the Arctic has been drawing attention for the economic, strategic, and geopolitical implications that are deriving from its exposure to increasing temperatures. As the thawing of its ice cap, increase in sea levels and loss of ice gives rise to environmental concerns, this scenario has opened the door to both, new opportunities and tensions. The region that proved to be of tremendous importance throughout the Cold War, serving as a frontier between the Soviet Union and NATO and becoming one of the most militarized regions of the world (Huebert, 2019, p. 2), is remerging as a strategic trigger point. On the one hand, its untapped natural resources make it appealing for geopolitical and economic reasons. The presence of non-combustible minerals, industrial resources and the sea lanes of communication (SLOCS) that surround the region, together with the improved conditions for its extraction have caught the attention of neighboring States (Sharma, 2021). In fact, the projected volume of the Arctic’s undiscovered oil and gas reserves is believed to amount to 22% of the world’s undiscovered resources that can be harvested with the existing technology (Turunen, 2019). Thus, the access to these resources has the potential to ensure energy security for those States with legitimacy for its exploitation. On the other hand, the current climatic conditions have cleared the way for new navigational routes in the region. Whereas maritime routes such as the Northwest Passage (NWP) and the Northern Sea Route (NSR) are only operational for few months of the year, researchers have estimated that by 2040-2059 they might be free from Arctic ice (Smith & Stephenson, 2013). Hence, the commercial viability of the, so called, “polar Mediterranean” (Roucek, 1983) can minimize by almost a half the shipping time and maritime distance travelled between East Asia and Western Europe via the Panama or Suez Canals (Herrmann, 2019).
In this power play, with the Arctic attracting the attention of States that are quite far from the region, tensions regarding its governance are surfacing. Differently to what happens with Antarctica, the Artic is not a global common and no treaty regulates its legal framework. Aiming to ensure their claim over the region, the original Arctic Five (Canada, Denmark, Norway, Russia and the United States) issued the Ilulissat Declaration, which reiterated their sovereign rights and jurisdiction over large areas of the Arctic Ocean (Sharma, 2021). This gave rise to questions concerning the rights left to non-Arctic nations to influence the region. Whistle this question remains unanswered, China is creeping into the region.
Since the Asian country conducted its first Arctic expedition, in 1999, and built its first research base, known as the “Yellow River Station” in 2004, it has progressively increased its investment (Lean, 2020). Nevertheless, from 2010 onwards, its pursue to be acknowledged as an Arctic stakeholder placed the region high in its foreign policy agenda. In 2013, its strategy began to pave the way for its endeavor and the PRC went from being a peripheral partner to being granted observer status in the Arctic Council (Chater, 2021). Little after, in 2018, Beijing published a white paper titled “China’s Arctic Policy” wherein it is described as a “near-Arctic state”, marking the first steps of its statecraft efforts to shape the region to its advantage (Lean, 2020). Thereafter, Beijing’s policy towards the Arctic is based on multilateral alliances and win-win gains between the players involved, which could eventually support China’s claim overt its legitimate presence in the region (Hossein, 2019, p. 4). In this regard, the State’s involvement in the Arctic has been directed at expanding its footprint in the economic and scientific fields. Pertaining to the former, in 2013 “MV Yong Sheng”, a Chinese commercial ship embarked on the first trip from a Chinese port to Rotterdam via the NSR (Jian, Thor & Tillman, 2018, p. 347). Ever since, Russia and China have collaborated closely to benefit from the melting of the Arctic and establish a safe and commercially viable transport corridor through the NSR (Lean, 2020). These ambitions were crystallized with the release of China’s “Vision for Maritime Cooperation Under the Belt and Road Initiative” in 2017, thereby reaffirming its desire to extend the BRI to the Arctic so as to connect Europe and Asia trough what was labelled as the “Polar Silk Road” (Manenti, 2017). Arctic shipping routes are estimated to be 40% cheaper than traditional ones (Baldassarri, 2014) and bearing in mind that the Asian country executes 90% of its trade through maritime transport, the advantage is considerable (Hossein, 2019, p. 4). Moreover, the diversification of routes might bring an end to China’s “Malacca Dilemma”. This refers to the vulnerability to a naval blockade and the lack of alternatives that China has to endure as consequence of the deteriorating relations with India and the power that the US Navy exerts over the Strait of Malacca, which currently accounts for 80% of its trade with Europe (Paszak, 2021). Similarly, China’s scientific research and cooperation with Arctic countries is a core component of its policy towards the region. Seeking to strengthen its legal right to expand its role and access to the Arctic, Beijing has resorted to science diplomacy (Sharma, 2021). Since purchasing the Xuelong icebreaker in 1993, the PRC has conducted more than 12 expeditions (Xinhua, 2021) and has strengthened the maintenance and construction of research, ice and satellite stations, vessels, icebreakers and other supporting platforms in the region. However, there might be more to it than scientific research.
The belief among Chinese strategists and scholars that the US is using the Arctic as a, yet another, front in its anti-China containment and concerns over the increasing security competition make China’s scientific interest in the region something that seizes no small amount of attention. Thereafter, while Chinese expeditions might be disguised as purely civilian research, a closer scrutiny reveals the dual implications (civilian and military) of most of its research programs (Lean, 2020). As an example, the People’s Liberation Army Navy decision to dispatch vessels to Arctic and US waters, including a fleet oiler, surface combatants, amphibious warships and a guided-missile destroyer and frigate, among others, together with the recourse to polar-orbiting military satellites, fails to justify their supposedly “purely civilian aspirations” (Dale-Huang, Doshi & Zhang, 2021, p. 29). In a similar manner, the testing and deployment of dual-use assets such as underwater robots, buoys for monitoring air-sea interactions, cloud-based online platforms, autonomous underwater glider and polar fixed-wing aircrafts evidence how Beijing is working towards its autonomy from foreign satellites and stations for Arctic data (Lean, 2020). What’s more, there are signs that herald China’s desire to invest in nuclear-powered icebreakers, which could ultimately lead to the transfer of that technology to military vessels (Dale-Huang, Doshi & Zhang, 2021, p. 30). Thus, the ongoing “weaponization of science” by the PRC has raised the alarms among Arctic littorals which have condemned the dual purpose of its activities (Buchanan & Glaser, 2022).
At this point, the question of whether Chinese ulterior motives for accessing the Arctic are realistic and attainable might come up. In this regard, everything seems to suggest that Beijing’s interests in the region are likely long-term. It is important to bear in mind that the Arctic is not the South China Sea, its number one priority together with Taiwan, with which the PCR has historic ties and is exercising a more aggressive policy. Moreover, the aftermath of the covid pandemic and its economic headwinds have slowed down operations in the region. Nonetheless, China still wants a seat at the table in deciding the Arctic’s future and, therefore, is expected to persist with its pursue of dual-use scientific research and protection of commercial interests. In fact, part of its strategy might be to quietly keep on establishing itself as a near-Arctic state, similarly to what it first did to advance its territorial ambitions towards the South China Sea (Grady, 2022). In the midst of the increasing tensions between Beijing and its Western counterparts the future of its Arctic agenda will presumably become “ever more salient to the future of trade, sustainable development, and international security” (Buchanan & Glaser, 2022). As a matter of fact, the best example of the seriousness with which major players in the region are reacting to China’s advance in the Arctic is found in the shift of the US Arctic policy. The new strategy released in October 2022, which complements NATOS’s, calls for the enhancement of military exercises, the expansion of the US’ military presence in Alaska and NATO States and the compromise to rebuild its icebreaking fleet (Grady, 2022). Few months later, in February 2023, US-led military exercises in the Arctic, hosted by Norway and Finland, brought together more than 10,000 military personnel from the UK, US, Germany, Denmark, the Netherlands, Norway and Finland (Bridenthal, 2023). Likewise, Denmark, owing to what the country’s Foreign Policy has described as “a new geopolitical battlefield”, has reviewed its security policy, increasing its military budget with the “Arctic capacity package” aimed at intensifying surveillance with radar, drones and satellites (Grady, 2022). In this increasingly assertive scenario, that resembles that of the Cold War, the Arctic is swiftly emerging as a region of militarized power politics.
China’s Ascendancy and its Influence on Global Structure
The rise of China is, without a shadow of a doubt, one of the most significant geopolitical movements that have emerged in the twenty-first century. This transformation of a civilization that was mostly agricultural into a worldwide economic powerhouse has had a great impact on the existing order of the international system, with repercussions extending from the economic sphere into the geopolitical sphere as well as the cultural sphere.
As a direct consequence of China’s progress, the global economic environment has been subjected to a fundamental adjustment. As a result of its fast industrialization and vast population, it has established itself as the world’s leading exporter and the world’s second-largest importer. China has been able to exercise a significant amount of influence on global trade and financial institutions as a result of its size and economic weight. As a result, China is often in a position to dictate the terms of trade agreement conditions and decide the course of global economic policy. In addition, China’s ambitious Belt and Road Initiative, which seeks to build a modern-day Silk Road by creating land and sea trade links between Asia, Africa, and Europe, implies that Beijing plans to strengthen its economic domination worldwide. The Belt and Road Initiative aspires to create a modern-day Silk Road by constructing trade connections between Asia, Africa, and Europe.
The growth of China has caused a shift in the geopolitical balance of power, which has the effect of challenging the United States’ long-standing hegemonic position. As a consequence of China’s substantial investments in the advancement of its military technology and capabilities, other strong nations are worried about the nation’s intentions. Its belligerent stance in border conflicts, particularly those in the South China Sea, is a sign of the country’s rising military confidence. As China takes on more responsibilities inside international bodies and creates strategic relationships, especially with undeveloped governments, its diplomatic power has been growing at an impressive pace.
The emergence of China has also had a substantial effect on the country’s cultural traditions. The media, the language, and the culture of China are now having an outsized impact on other parts of the world. One indication of this cultural diffusion is the proliferation of Confucius Institutes, which are institutions committed to promoting the development of Chinese language and culture. This cultural impact is shown by the growing popularity of Chinese literature, cinema, and food on a worldwide scale.
Nevertheless, issues have been brought to light as a result of China’s ascent. Concerns have been raised over China’s compliance with democratic values, human rights, and international agreements, as well as concerns regarding China’s intention to overtake the United States as the leading superpower in the world.
As a result of China’s ascent to power, there are a few potential outcomes for the direction of the existing order in the world:
The United States and China would work together to maintain the existing order in the world and develop satisfactory solutions to the many urgent problems facing the planet in this potential outcome. The stability of the globe might be preserved by doing this, despite the fact that it would require considerable sacrifices on both sides.
Competition between the United States and China: If these two countries were to have a conflict, it would be much like the cold war all over again. Unpredictability and instability are some outcomes that might occur from such an event.
If China were to take over from the United States as the dominant force in the world, the existing system of international relations would experience profound upheaval. Even while it is hard to foresee the consequences of this scenario, there would unquestionably be enormous shifts in the power relations that exist on a worldwide scale.
The emergence of China has unquestionably had an effect on the rest of the world, notwithstanding the unpredictability that surrounds the country’s future prospects. As a result, it is of the utmost importance for countries all over the globe to devise strategies that will enable them to navigate this turbulent terrain with composure and success, so assuring a future that is both wealthy and secure for everyone.
China Expands its Reach to Europe and Africa
For decades, Iran was firmly within the US ambit, but then came the revolution. The Shah, whose family had ruled for over half a century, fled abroad. And following a failed attempt at parliamentary democracy, the Iran Revolutionary Guards led by their cleric masters took over.
While there are elections now and an elected government, the Supreme Leader Ayatollah Ali Khamenei sets the broad outlines of domestic and foreign policy. He also controls the judiciary and is head of the armed forces.
At present, Iran is further strengthening its ties with the Shanghai Cooperation Organization (SCO) through its observer status with a view presumably to eventual full membership. The SCO embraces almost all of Central Asia, the Indian Subcontinent and Sri Lanka. It is a vast bloc including the two largest developing economies in the world.
Japan and Taiwan have already expressed their trepidations at China exercising muscle along its littoral regions and the coastal islands down to the Philippines. Their principal concern is for the shipping lanes up which tankers bring fossil fuels to them from the Middle East.
There appears to be no concerted US policy to deal with these issues other than random acts of petulance. Thus the bombing of the Nord Stream pipelines exposed by the investigative journalist Seymour Hersh. It thwarted Germany’s desire for cheap Russian gas transported under the Baltic Sea from Russia to Germany. The result was a point or two drop in German GDP as it scurried to buy liquefied gas from the global market including the US.
If earlier, it had acquired half of its gas from Russia and a third of its oil,the invasion of Ukraine accelerated a move away from Russia. However, everyone is quite aware that when the Ukraine problem dies down, the gas and oil will still be in Russia as will Europe’s hunger for them and the added attraction of low prices. The multiplicity of routes including one via Turkey just across the Black Sea — more than one way to skin a cat as that awful expression goes — add to the temptations.
After all that has happened, is it any wonder Putin gave up on an impotent Europe and went east. So it is that China’s ravenous demand for energy in a fast-growing economy is to be supplied by its neighbor Russia.
China is also constructing roads (the Belt and Road Initiative) along Pakistan’s spine to its newly built (by China) port of Gwadar. It provides a direct road link from China. Of course, Pakistan is an old trusted friend and now dependent ally.
From Gwadar, the Gulf and the Gulf States are a stone’s throw away, and Africa just a hop, skip and a jump. China has been investing in Africa for quite some time and its entrepreneurs have been independently starting businesses there. Now travel just became that much easier — just a two to three day drive instead of the circuitous route across the Indian Ocean and up the Pacific coast.
Who wins? Who loses? It should not be difficult to discern.
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