US-China Trade War: The Spillover Effect

• Published in: Journal of Asia-Pacific business 2020-01, Vol.21 (1), p.1-3
• Main Author: Ajami, Riad A.
• Format: Article
• Language: English
• Subjects: Economic impact; Exports; Farmers; Foreign investment; Global economy; Imports; International relations-US; International trade; Money; Petroleum; Presidents; Spillover effect; Tariffs; Technology; Trade disputes; Trade relations; US exports; War
• ISSN: 1059-9231; 1528-6940; 1547-0636
• DOI: 10.1080/10599231.2020.1708227

The first-world economy, the United States, and the second economy, China (now first to some), by some metrics are at loggerheads. The trade war between the United States and China is currently in its third year, and its resolution is unclear. President Trump has charged that China engages in unfair trade practices, usually devalues its currency to improve its export position, and forces US firms to transfer proprietary technology to Chinese firms that are labeled by the Chinese government as national champions. Moreover, Chinese regulatory commercial practices within the country favor Chinese firms and allow the Chinese enterprises to steal US technology. Some numbers convey the story. Most recently, starting in July 2008 and until July 2019, the United States has imposed tariffs estimated at $436 billion on Chinese imports. China, on the other hand, has imposed tariffs on an estimated $160 billion worth of imports, matching the US tariff schedule range of 10 to 25 percent. The US-China trade war is significant and is likely to result in some economic dislocations to both economies. The United States and China are each other’s largest trading partners although Mexico and Canada have recently surpassed China. The US is currently running the largest trade deficit with China, a point that is always mentioned by President Trump. Moreover, the mix of imports and exports is likely to be different. US exports to China are commodity-based, such as soybeans, wood products, oil and gas. Specifically, soybeans are the main products that the United States exports to China, and US farmers are beginning to suffer some of the economic impact related to the restriction of their products to China. The spillover effect of the US-China trade war is producing a ripple effect throughout the Asian economies, particularly Japan, the Asian Tigers, and India. Furthermore, this is beginning to produce new realignments in trade relations between Japan and its Asian trading partners, such as the Asian Tigers. The overall result is producing some economic benefits for the Japanese economy, and China and Japan are likely to get closer in terms of their trade and direct foreign investment links.