Story Of The Week

TRUMP TRADE TARIFFS

“Culture makes people understand each other better. And if they understand each other better in their soul, it is easier to overcome the economic and political barriers. But first, they have to understand that their neighbor is, in the end, just like them, with the same problems, the same questions.”

Paulo Coelho

To protect the U.S economic interests, United States President Mr. Donald Trump took measures of imposing taxes on imports. Being an import oriented country, US elected the President who is willing to take protectionist steps in order to put “America First” trade policy.

The goal of the trade policy is to reduce America’s trade deficit with China by around $50 Billion. Through these tariffs, the American Government also aims to reduce Chinese Investment in US Technology.

Chinese Government has responded sharply with a list of tariffs it would impose on the United States. This includes a 15% tariff on US Products (Dried Fruits, Wine, Steel Pipes) and 25% tariff on Aluminium and Pork Products. It aims to target around 128 such products.

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When the US stock market anticipated the tensions, it fell sharply, with the Dow Jones slipping over 700 points.

In today’s article, we will try to discuss the trade tariffs in detail along with the tussle US has been going through.

The North Korea Tussle

Trump’s stance towards his foreign policy forms a global debate as to its repercussions to the world. All these decades we have seen America as a global leader. But today their approach of putting its interests first and at the same time countries like China dominating the world would hamper this title.

This debate on trade tariffs heated up after Trump in December stated that he was not happy that China had allowed oil shipments to go into North Korea. We already are aware of the fact that the deteriorated relationship between the US and isolated country, North Korea after Trump came to power. But China’s stance of supporting North Korea by supplying them oil will influence US trade policy. Trump mentioned that they have been soft on China because the only thing more important to him than trade is war.

Upon the U.S. industry pleas for relief from a recent flood of cheap imports and recommendations of the US International Trade Commission (ITC), President Donald Trump has approved to impose safeguard tariffs, this January, on imported residential washing machines and solar cells and modules. This had a big impact on the Asian nations especially China and South Korea with China being biggest maker of solar panels and South Korea producer of washing machines.

President Trump ran for the elections in 2016 hitting out China for being a job stealer, liar, copycat, currency manipulator, a hacker, and a spy. But the Xi Jinping November’s visit in 2017 to the US and in that they cozied up to each other made everyone think that there would be no barriers. But months after this, Trump government imposed sanctions against China for the alleged theft of American intellectual property. Then comes the issue of IPRs.

 

IPRs

Among the various reasons being thought of for the sanctions, one is the accumulating complaints against Beijing. The complaints stated that Beijing unfairly required the United States companies to share their technology as a cost of doing business in that country.

This made the administration concerned about China’s intentions towards strategic investments in the States. This made America believe that if they do not act, they would be losing their intellectual property. Regarding this issue, the US Trade Representative said:

“Our view is that we have a very serious problem of losing our intellectual property, which is really the biggest single advantage of the American economy in my opinion.”

What other Business Leaders Think

They believe that China is problematic with the IPR (Intellectual Property Rights) treatment, but they also believe that the tariffs would backfire. A lot of trade groups sent a letter to Trump urging him to select a different course.

The trade groups believe that the imposition of tariffs would (as it has already started) trigger a chain reaction of negative consequences for the US Economy. This will stifle US Agriculture, Exports and will raise costs of doing businesses. In their three paged letter, they clearly pointed out where the cut would impact the businesses.

One thing stands clear, the businesses sure do not want a trade war between the US and China.

The Trade Deficit

The US had $337 billion Trade Deficit with China in Goods alone. However, as far as services are counted, the US has a surplus.

The tariffs are aimed at reducing this surplus in goods by slapping tariffs on imported steel and aluminum.

The War of Words

There have been different opinions regarding the tariffs. The American administration defended by saying that years of talks with the previous Presidents could do no good. Thus, the president realized the requirement of some “tougher action”.

The Critics warned that a unilateral action by the US may complicate Trump’s effort to cultivate China’s help in addressing North Korea’s nuclear program. Further, it will also disable an opportunity to put International Pressure on China for criticised practices.

Rep. Ron Kind said- “America first does not mean America Alone”. He also added that by isolating America and by demonizing friends and allies would make America’s trade Agendas much complicated.

The Chinese Expressed disappointment by calling the move a typical unilateral trade protectionist action. Chinese clearly said that though they do not want a trade war, they are not afraid and will not recoil from a trade war. They said that if the US initiates a trade war, China would fight to the end to “defend its own legitimate interests with all the necessary measures”.

The global countries like the US and China imposing tariffs will only create walls for the construction of globalization while the world is struggling strong to bring inclusiveness. All could we do is wait and see the repercussions of these actions and its impact on other countries.

 

References:

https://www.npr.org/2018/03/22/596058282/president-trump-orders-50-billion-tariffs-on-china

https://www.wsj.com/articles/u-s-imposes-trade-tariffs-signaling-tougher-line-on-china-1516658821

https://www.thestar.com.my/news/world/2017/12/29/trump-says-disappointed-china-allowing-oil-into-north-korea-tweet/

https://www.bloomberg.com/news/articles/2018-03-22/what-s-intellectual-property-and-does-china-steal-it-quicktake

http://www.itic.org/dotAsset/883ba45b-a06a-4b2a-b6ab-5c84c8a4a865.pdf

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