Shatha Khalil *
Two words that have recently spread between the world’s two largest economic powers, the US and China where they have begun to impose tariffs and trade barriers on each other. America is one of the world’s largest economic powers and China is known for its strong economic system.
Reasons for trade war?
The idea of a trade war began to appear with US President Donald Trump imposing tariffs on a number of China’s imports to America, and in one of his twitter tweets he said he was ready for a trade war and that was good in his view.
The US measures to impose tariffs on Chinese imports are a clear violation of the global economic system. In addition to the principles of the World Trade Organization (WTO), which Washington was one of the biggest supporters of its founding in 1991 after the GATT, the US- China trade war is not the first of its kind globally , but it is the largest.
The new US tariffs on China’s imports have come into force, warning of a trade war between US President Donald Trump and China. The United States has imposed tariffs of 25 percent on a value of 34 billion dollars and on equipment, electronics and advanced equipment manufactured in China, Cars.
And customs duties 25% on iron imports and 10% on aluminum imports, followed by the imposition by US President Donald Trump of new customs duties on imports of Chinese goods exceeding 60 billion dollars, equivalent to 42.5 billion euros, as a means of reducing Chinese investment in America and to avenge from china for stealing US intellectual property rights in technology, and then Trump finally threatened to impose customs duties worth 100 billion US dollars on China.
In contrast, China has imposed customs duties of 25 percent on 128 US goods, mainly pork and wine, where these fees affect US imports worth about 3 billion dollars, and Beijing said the move aims to protect the interests of China and compensation for loss resulting from the imposition of new US customs duties on the Chinese imports.
The American economy
The United States has the world’s most powerful economy and the world’s first with an economy of about $ 20.4 trillion. It relies on a market economy based on free investment and commercial competition. It has a wealth of mining and energy resources: petroleum, natural gas, coal and uranium that represent the most important products of the country. Despite this wealth, the United States is the world’s largest importer of fuel.
– The United States of America represents the first agricultural force on the global level, both in terms of production or exports. In addition to the fact that American agriculture enjoys fertile land and an appropriate climate, it is characterized by a large industrialization. The most important sectors of agriculture are: cattle breeding, grain cultivation (corn, wheat, barley, etc.), industrial plants (cotton, peanuts, tobacco, etc.). Marine fishing is among the most active sectors.
The United States has the most important industrial production at the global level. The success of the US industry is due to its ability to innovate, its technological output, product diversity and the availability of qualified manpower. The United States of America is in the forefront of oil, aviation and electricity, and consumer goods. But the American industry is progressing more and more in the areas of advanced micro-technology (aviation, space, electronics, armament, and micro-chemistry).
– Today, the services sector is important in the US economy where there are various resorts and luxury places and markets such as the famous Wal-Mart markets, which ranks first in Fortune magazine according to sales and profits. Among the most important services are management, tourism, entertainment, banks.
Chinese economy
The economy of the People’s Republic of China is the second largest economy in the world after the United States, with an economy of about 14 trillion US dollars, which is China’s GDP and it has increased by more than 2 trillion dollars compared to last year,
China’s population is 1.39 billion, China’s economic reforms under the late President Deng Xiaoping began in 1978, becoming the world’s fastest growing economy, which lasted for a decade at a rate of 10 percent a year, saving more than 800 million people from poverty.
China achieved rapid economic growth in the last quarter of the century with an annual growth rate of 10 percent in gross national income.
Which means an increase in per capita income in China at an annual growth rate of more than 8% over the past three decades, which contributed significantly to poverty reduction, China is one of the largest economies in terms of production, it is one of the top ten countries in terms of gross national product . If production is measured by the number of population, China is lagging behind, and surpassed by more than half of the world, in terms of average per capita income, this is why it is considered a developing country.
The national government controls most economic interests; it operates factories, transport companies, banks and foreign trade. State income depends on the collection of taxes on profits earned by government departments, and these taxes are usually used in the development of industries.
China has made significant progress in economic growth, and the state has provided many jobs, which have ensured a better life for the population. China also has various sources of fuel and minerals, providing China with the opportunity to become developed countries and, more importantly, its active and highly skilled people. China is developing five-year development plans, and the amounts invested in different sectors are being carefully distributed. ”
The gross domestic product (GDP) of the United States of America rose to 20.4 trillion US dollars, according to IMF estimates of 2018, which shows the growth of the US economy from 19.4 trillion dollars last year, and its economy exceeded 25.1 percent of the world economy , while the size of GDP OF China amounted 14 trillion dollars more than 2 trillion dollars compared to 2017.
In the same context, according to a World Bank report, the world economy is expected to increase by 6.5 trillion dollars between 2017 and 2019, and the share of America’s GDP will be 17.9% of this increase in growth, while the share of China is expected to double this figure by 35.2%.
The electronic economy of China and the United States is expected to see a rise in China, where e-commerce has grown by less than 1% over the past ten years to reach 42% today compared with America’s contribution to e-commerce by 24%, down from 35% in 2005.
The report indicated that in 2050, China is expected to advance to America, its economy will reach 58.5 trillion dollars, followed by India with 44.1 trillion, and the United States will drop to third place in the world to 34.1 trillion dollars.
It is noteworthy that there are emerging economic countries – the five BRICS( Brazil, Russia , India , China, and South Africa ) – began to make way to become large economic forces, and these countries announced the start of the implementation of the Silk Line, which includes China, Russia, Iran, Syria and Egypt, and it is expected that once the Silk Road is completed , China’s economy will advance to be the world’s top position in 2022, after the removal of Germany 2009 and Japan 2010 from its way.
Accelerated growth in China: The Chinese economy grew by 6.9 percent year-on-year in 2017, surpassing the government’s 6.5 percent growth rate , according to the National Bureau of Statistics report of June 18, 2018.
According to the report, the Chinese economy maintained its stability in 2016 as a result of the government’s promotion of supply-side reforms, the development of new growth incentives and the refrain from ” flooding ” the economy with strong reactions.
China’s economic growth, which became the world’s second-largest economy after the US economy in 2016, was 6.7 percent, the lowest growth in a quarter of a century.
China has committed itself to quality development, including the creation of a proper economic structure in a better environment, rather than just focusing on economic growth.
Retail sales of consumer goods grew 10.2 percent on an annual basis to amount $ 5.69 trillion, accounting for 58.8 percent of the economy’s expansion last year, while online spending jumped 32.2 percent to a record $ 1.1 trillion.
As China continues to rebalance its economy and decline of the increase in credit growth, the World Bank expected China’s economy to grow 6.4 percent in the last year and 6.3 percent in 2019.
What is Washington’s goal of its recent economic measures? The economists said “The United States has adopted selective policies or protectionism to reduce the trade deficit – exports and imports – as China’s biggest source, and China is the second-largest US debtor after the US Federal Reserve ,” a “private enterprise”, and Washington’s attempt to soften Chinese hegemony over the US economy, as well as Beijing’s unconventional economic expansion in Asia and Africa, which Washington sees these markets as a monopoly for it .
As for the economic balances around the world, the emergence of the so-called Asian arch, which extends from Russia to China, through India, to Iran, these four countries have contributed to the rise in global economic growth rate over the past five years by more than 50% as well as they have achieve a large surplus in the balance of trade with the Atlantic countries.
In conclusion, all are threatened with a loss in the outbreak of a trade war; the two sides will try to ensure survival and financial gains at the expense of the other side. This is what China has already begun to respond to America’s position of imposing customs duties on its goods. A number of major companies and exports are expected to be affected by this war”
Economic Studies Unit
Rawabet Center for Research and Strategic Studies