US China trade war triggered; the largest in economic history
The trade war between the world’s two biggest economies – US and China, was triggered effective from 6 July with US imposing 25% tariffs on 818 Chinese products from 00:01 Washington time (04:01 GMT), which was midday in Asia.
US tariffs on US$34 billion Chinese goods prompted China to respond with the same intensity and scale. It imposed retaliatory tariffs on 545 US products, including agricultural products like corn and soybeans. The China’s Ministry of Commerce (MOC) stated that the US has launched the “largest trade war in economic history, violating World Trade Organisation (WTO) rules.”
The MOC said in a statement released minutes after the first wave of US tariffs took effect said, that China had promised not to shoot the first shot, but in order to safeguard the core interests of the country and the interests of masses, it was forced to make the necessary counter attack.
US president Donald Trump was quoted by news agencies saying that, “the second set of tariffs, involving US$16 billion of Chinese goods, is expected to take effect in two weeks.” Further tariffs could be imposed on another US$500 billion worth of Chinese goods in subsequent rounds, he added.
Products under consideration in the second set include polyethylene (PE), polyvinyl chloride (PVC), polycarbonate, and polyamide alongside propane, LPG and hydrocarbon gases, naphtha, crude benzene, toluene and xylenes, and crude oil.
For US, the move is the first in the series with a hope to bring down its huge trade deficit with China. For China, an export-oriented economy will have to take a major hit if the row escalates further. Worries of trade war had already set the Yuan on a free-fall, tumbling over 3% in June. It will take some time for China to find new markets for their export surpluses, options like using proxy economies can be one of them.
For textiles, the trade war will create upheavals in global markets triggering inflationary pressures in both economies which will make apparels and clothing dearer. This may help other economies to sneak into the global textile market, but many of them are import dependent for raw material and a stronger US$ will make imports costlier, which in turn will make final textile product costlier for export.
China is the largest producer and supplier of textile products while US is the major supplier of primary raw materials like feedstock and intermediates. It is also the largest cotton exporter in the world and may face difficulties in selling into China directly. If the trade is done using proxy economies, than the objective of cutting trade deficit will fail dramatically for US. China has the option of looking at its internal markets.
