A China-US trade war?
Robert Lighthizer, a United States trade representative found out the Free trade deal as being misused by some countries. The U.S goods are taken in at a higher tariff in other countries and U.S has minimal tariffs to counter it. This makes an unfair competition for the country’s own industries. The proposed solution to the problem was to impose taxes and protect the country’s industries. This includes a tariff of 25% on steel and 10% on Aluminum.
The problem started when the tariff was imposed is China, the world’s second largest economy. The tariff was worth sixty billion dollars on Chinese manufactured goods. Mr. Trump in his speech, justified this by accusing the Chinese of stealing America’s intellectual property worth hundreds of billions of dollars. He assured his people that this move would create jobs and help the American economy grow. Claiming that it’s not China specific, Mr. Trump said many more countries are yet to come.
The policy of protectionism is not new and quite normal for states without a strong industrial base, India being a good recent example. This is not even absolutely alien to the United States as similar steps were taken in 2002 by the then President George Bush to protect the country’s steel industry. However, the step backfired as analysis carried out later showed that it did more harm than good. Imposing the tariffs was a step away from the long held US stance on free trade. This is also against World Trade Organization rules and regulations and they even did not take other stakeholder countries into confidence.
Moreover the abrupt Chinese reaction gave rise to speculations of a trade war between the two countries. Beijing responded by saying it could impose tariffs on 120 US goods in the range of 15-25 percent. “China does not want a trade war, but China is not afraid of a trade war,” the Chinese commerce minister said, “We are confident in our capability to face up to any challenge.”
This step might be a serious blow to President Xi Jinping’s vision to make China a world economic power over the next few decades, and it may have serious international consequences if two of the globe’s largest economies go head to head. If it does not stop soon then countries like Pakistan might have to choose sides. This could add fuel to the fire by further worsening the current miserable state of economic affairs. With CPEC already in the works, a slight tilt towards China might be in the best interest of Pakistan