US-China Trade Tensions

 Dylan Jack


Center for Continuing Education

University of Sydney

Ph: 02-87276700

Donald Trump, the US president has taken many decisions to protect US economy and trade. He declared to come out of the Trans-Pacific Partnership Program (TPP) within a week he came to power. Imposing different types of sanctions on neighboring Mexico, now he has moved ahead.
China is emerging as an aspirant country. Its aspirations are multidimensional but two of them are very prominent viz. to become global economic power and a military power as well. Xi administration is working on both fronts very promptly and there is hardly any internal opposition to that. During the years Xi has emerged a stronger leader within the communist party of China and now in a position to take aggressive decisions at national and international levels. His intense desire to develop China as a modern state has created a lot of trouble to the poor farmers, rural folks and, poor urban dwellers. There is no visible protest to it due to the personal image and position of Xi. He wants to translate this image at international forums too.  
The trade tensions are going to increase between these two countries due to personality building project of Trump and Xi. Who is the global leader? This question is yet to be resolved by the international community. China is encircling India by funding several developmental projects in its neighborhood-Pakistan, Bangladesh and, Sri Lanka. In a recent move, it has tightened its grip on Maldives and Nepal. OBOR project also shows this ambition. India poses a big and substantial challenge to Chinese dream of becoming global economic and military power. With roughly 7% of annual GDP growth rate and second largest populated country in the world, India is one of the potential markets for the global investors. Further, it is creating stronger ties with the US and Japan to worry China. This is defining a new world order where China, Russia, North Korea, Iran and, Pakistan are coming on one side and US, Japan, Australia and, India on the other. The trade tensions are going to widen across these two lines.
The trade is now mixed with ego and personality clashes. Markets all across the globe have seen volatility throughout last week. If tensions escalate further, investors will feel panic and surely withdraw from the market. It neither goes in favor of the US nor China. It will also force other countries to be protectionist and inter-global trade will move in a negative direction. In his recent tweet, Trump said, “We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!” Blaming the past is another strategy of Trump but it will not always. Tit for Tat policy adopted by China has raised the concern among Soybean traders in America. They are incurring huge loss. Trade tensions are the result of political tug-of-war but going to hit common businesses in both countries.

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