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How can the US-China End The Trade War and Improve Global Growth?

US-China Trade War: The China-US trade war is a long-running economic dispute between the People’s Republic of China and the United States of America.

President Donald Trump of the United States began imposing tariffs and other trade obstacles on China in January 2018, with the purpose of pressuring Beijing to modify its unfair trade, practices, and intellectual property theft, according to the US.

According to the Trump administration, these actions may contribute to the trade deficit between the United States and China, and the Chinese government needs the transfer American technology to China.

In response to US trade sanctions, China’s leadership accused the Trump administration of nationalist protectionism and responded with retaliation. Following the trade war’s escalation in 2019, the two sides negotiated a contentious phase one deal in January 2020; it ended in December 2021, with China failing to acquire American goods and services as agreed by a large margin. The trade war was universally regarded as a failure towards the end of Trump’s term.

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How can the US-China End The Trade War?

US-China Trade War

It’s past time to put a stop to the trade war between the United States and China. A trade agreement between the world’s two largest economic heavyweights has never been more critical than it is today.

Rather than settling scores, the United States and China should work together to put the world on a path to better trade growth and a more stable global economy.

The Ukraine conflict, the aftermath of the Covid-19 outbreak, and the possibility of rising global inflation all represent too many threats to the global economy right now.

The globe is in desperate need of assistance, and the United States and China can accomplish so much more if they can resolve their conflict quickly. A global recession could be on the cards if appropriate action is not implemented.

Long-term trend growth of more than 4% for the global economy is still achievable, but only if the appropriate policies are implemented. A significantly stronger global fiscal stimulus program, as well as a trade truce, would be extremely beneficial.

The ever-increasing trade deficit that the US has had with China since the 1980s has been a major point of contention. It has been on a one-way trend since 1985, with the exception of a brief pause following the commencement of the trade war in 2018 and the impact of the global recession triggered by the pandemic in 2020.

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Even after former US President Donald Trump imposed trade sanctions in January of that year, the US-China trade deficit hit a new high of $418 billion in 2018. Due to the epidemic, the trade deficit narrowed to US$310 billion in 2020, but when international trade flows return to normal in 2021, the deficit is rising again, reaching US$355 billion last year.

Without significant improvements on either side, the deficit could return to an annualized US$400 billion this year, based on present patterns.

Without a commitment from both Washington and Beijing to reduce the trade deficit, it will not go away. Meanwhile, as the US currency strengthens against a weaker yuan, things will only get worse.

US-China Trade War

For US exporters, breaking into the Chinese market will be considerably more difficult, while cheaper imports from China would only appeal to US consumers and businesses.

The yuan has lost roughly 4% versus the dollar in recent weeks as confidence in the currency has been eroded by Covid-related lockdowns in Shanghai and Beijing, while investors remain concerned about the dangers of the US Federal Reserve raising interest rates.

Trump accused Beijing of being a “currency manipulator” who kept the yuan artificially low to gain a competitive advantage in global export markets at the start of the trade war.

If the renminbi continues to fall, Washington and Beijing may have a great opportunity to join forces with official intervention to maintain exchange rate stability between the two currencies. This might be viewed as a significant first step toward cooperative policy coordination and a window of opportunity for greater economic cooperation.

To examine strategies to decrease the trade imbalance, Washington and Beijing must maintain open lines of communication. Better demand management measures are needed in the United States to encourage the consumption of more domestically produced goods.

Beijing is already taking the necessary measures by shifting China’s growth focus to more domestic-driven economic progress, reducing its reliance on overseas markets, as part of its dual circulation strategy.

To encourage faster bilateral trade flows between the two countries, one alternative may be to open China’s markets to more US goods. The rise of deeper collaboration would provide the global economy with a much-needed boost.

US-China Trade War

According to the International Monetary Fund, global growth would fall to 3.6 percent this year, with world trade growth halving from 10.1 percent in 2021 to 5 percent in 2022. It is within China’s and the United States’ ability to prevent it from slipping further. They must construct trade bridges as soon as possible.

As prices rise, the US trade representative suggests that tariff relief for China may be an option.

President Joe Biden’s top trade negotiator hinted that relief from US tariffs on China is one option being considered to combat the fastest inflation in four decades, though he cautioned that the tariffs should be considered in the context of larger economic policies.

US Trade Representative Katherine Tai said in an interview at the Milken Institute Global Conference in Los Angeles on Monday that tariffs should be evaluated as part of a broader review of strategy, including monetary, fiscal, and tax policy.

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According to Tai, the US must ensure that the measures it uses to address the short-term difficulty of inflation are successful and do not jeopardize the medium-term goal of changing China’s relationship.

According to Tai, the tariffs have prompted several companies that formerly produced in China for the US market to relocate their manufacturing and operations to other nations.

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