NEWSApr 13, 2018

U.S.-China Trade War is highly explosive

On March 22, 2018, U.S. President Donald trump signed a presidential memorandum against China at the White House.

According to the "301" survey results, the United States will impose tariffs on about $60 billion of goods imported from China each year, and restrict Chinese investment in the U.S. technology industry. The U.S. taxation fields in China include those industry identified in “Made in China 2025” strategy, such as medical device, high-speed rail equipment, biomedicine, new materials, industrial robots, information technology, new energy vehicles, and aviation equipment. On March 23, the Ministry of Commerce of the People's Republic of China responded to Trump's tariff policy, released a list of suspended concessions for the U.S. import of steel and aluminum products, and proposed to impose tariffs on certain products imported from the United States, balancing the loss of profits caused by the United States' imposed tariffs on the Chinese side. The list covers areas including: fresh fruit, dried fruit, nuts, wine, modified ethanol, ginseng, seamless steel tube, etc.

The Logic Behinds the Sino-US Trade War

Trade frictions between China and the United States have occurred from time to time and mostly concentrated in China’s advantageous export sectors. In recent years, the rapid rise of China's economic power as well as science and technology strength has put pressure on the United States. It seems imperative that Mr. Trump launches a trade war with China, limiting the development of China's high-tech industry. At present, China is in the period of rapid development in industrial upgrading and economic transformation. Experts expect China's GDP growth rate to be 6% - 8% between 2018 and 2019, while the GDP growth rate of the U.S. will only remain at around 2%. In addition to the speed of economic development, China has achieved several achievements beyond the United States in the field of manufacture of science and technology, especially in the area of artificial intelligence. "China's artificial intelligence is booming" and "China's artificial intelligence will catch up with the United States" and other related topics have been reported by a number of foreign media, which has aroused even greater awareness of the crisis in the United States. The U.S. proposal to ban operators from purchasing Huawei’s or ZTE’s products and services better reflects the concern that its technological superiority may be replaced.

Besides the economic demands, the reason behind Trump's initiation of trade war is the political appeal of reducing China's long-term trade deficit with the US, guiding industry backflow and boosting economic growth. Although Trump has repeatedly stated that he wants to reduce the trade deficit since he took part in the election, the U.S. trade deficit with China was not declined instead of rising from $347billion in 2016 up to $375.2 billion in 2017. Trump is using the trade war to win votes for his upcoming mid-term elections in 2018.

Sino-U.S. Trade War, Cast its Shadows

The new round of Sino-U.S. trade war is approaching, and all walks of life as well as the entire economic market will be severely affected. Roberto Azevedo, the general director of the World Trade Organization (WTO), said in an interview with the BBC on the 28th, “If the U.S.-China trade war is fully launched, it will have a serious impact on the global economy and world economic growth may shrink dramatically.”

Since the news of Sino-U.S. trade war came out, it has attracted a lot of turbulence in the international market. The Shanghai and Shenzhen stock markets were hit hard, with the three major stock indexes plummeted more than 3%. The new energy auto industry appears to have no direct impact in the short term, but its impact is bound to be from shallow to deep process. Vehicle Trend believes that there will be lose-lose situation for both country in the long term. On the contrary, the news of Sino-U.S. trade war has put short-term pressure on Chinese telecommunications sector and the military industry. However, in the long run, it can promote the growth of Chinese enterprises as well as reduce China’s dependence on North American advanced technologies and products, improving the core competitiveness of China’s domestically produced products, and help accelerate the domestic substitution process in high-tech industries such as communications and military industry.

Even if there are many unknown crisis hidden in the Sino-U.S. trade war, and the market pessimism spreads. However, the more you can maintain a rational attitude when market sentiment fluctuates, the more you can find opportunities in danger.

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