The US-China Trade War: The East vs the West

 In Business
When whales fight, the shrimps’ backs are broken.

This phrase accurately depicts the trade war clash between two titans: the US and China. The repercussions spread throughout virtually the entire globe, thus affecting any country that trades internationally, including Singapore. As a tech-driven global mobility platform based in Singapore, Moovaz is no different. As most of our readers come from both the Western and Eastern regions of the world, we were curious about what the trade war would mean for either region. Here’s what we found out:

The trade between the United States and China has always held a very integral position in the worldwide market.

They are bound to have some effects on the rest of the East as well as the West. The after-effects of the trade war are mostly negative but, there’s always a silver lining if you look hard enough.

US Trade Wars Impacts on The East

US-China Trade War Impacts on the East

  1. For China: Due to the high import content of its exports, China also experienced a significant drop in real imports, which fell 3.2% below the baseline in 2020. Real fixed investments will be restrained in the trade war scenario, as both foreign and domestic investors will take a more cautious approach to capital spending in China
  2. For Vietnam: The Vietnam economy was boosted by almost 8 percent due to importers seeking to avoid Donald Trump’s tariffs
  3. For Southeast Asia: Producers seeking low tariffs also diverted trade to benefit Taiwan, South Korea, Chile, Malaysia and Argentina
  4. For Japan: The US-China trade war has so far only had a limited impact on Japan’s lukewarm economic growth, but the affect is likely to grow if Washington imposes further sanctions on Chinese imports
  5. For Hong Kong: The trade war’s impact may be felt in many ways in Hong Kong, including a challenge to the city’s role in Beijing’s Greater Bay Area megaproject

    us china trade war impact on hong kong 2

  6. For Taiwan: When the US’s import of components and inputs from partners drop, Taiwan appears the most vulnerable, by dollar amount
  7. For Singapore: The US tariffs directly applicable to Singapore affect a relatively small set of products. Singapore’s exports of these products to the US account for about 0.1 per cent of Singapore’s total domestic exports to the world.
  8. For Middle East: The stock markets in the Middle East takes a hit every time there is a new round of tariffs imposed, including the Dubai Financial Market, Saudi Arabia’s Tadawul and the Abu Dhabi Securities Exchange
  9. For India: A significant shift in the manufacturing sector could mean a golden opportunity for India if it is properly positioned. It is one of the few economies that stands to benefit from the trade tensions

US Trade Wars Impacts on The West

US-China Trade War Impacts on the West

  1. For the US: Not surprisingly, the United States experiences the largest decline in real imports of goods and services. Compared with the baseline level, real US imports fall 4.5% in 2020. The impact of the U.S.–China trade war is greatest in states that export agricultural products, electronics and chemicals directly to China
  2. For the EU: They might potentially be the biggest loser: the global trade war could represent the biggest single threat to the economic upswing that has helped the region get past its financial crisis
  3. For Canada: The trade war could shave 0.8 percentage points off Canada’s economy and might shrink Canada’s economy enough to kill 150,000 jobs
  4. For Mexico: China’s market share could be worth up to 1.2 per cent of its GDP, and would more than offset the loss from the impact of the first round of tariffs
  5. For Argentina: The country has benefited from the disrupted soybean market, becoming both the leading importer of US soybeans and selling more of its own to China
    us china trade war impact on brazil
  6. For Germany: Germany is the tail on the U.S.-China trade war dog and at the end of the day, 47% of GDP (gross domestic product) from Germany is exports — the majority of that going to those two trading partners
  7. For France: China’s import structure across its main trading partners reveals that France, Germany and the U.K. are the closest ‘U.S. proxies’ in terms of their relative exports to China
  8. For Brazil: Brazil’s soybean farmers, for example, have triumphed spectacularly in the US-China trade war
  9. For Italy: Italy runs a substantial trade surplus with respect to the USA, over 25 billion euros in goods and 1.7 billion euros in services. These figures highlight the importance for Italy of trade with the US

US china trade chart

How did the Trade War begin?

Until the 1970s, the United States had not been doing any trade with China. But, after a reconciliation, the trade grew so quickly that China became the second most important nation for trade to the United States. Both of the nations traded hundreds of different items such as lamps, air conditioners, bath salts, handbags, baseball gloves, diaries, toilet paper, and tobacco.

The trade between China and the U.S. had proved drastically beneficial for both of the nations and their economy. China is known to provide quality products at cheaper prices and their inventions are extremely creative. According to America Clothing Apparel; 41% clothes, 72% shoes and 84% of the accessories in the United States are imported from China. On the other hand, the U.S. is also one of the most advanced nations in the world. They have the best versions for everything available from war equipment to modern sciences. But, from some years the tables have been turning and it is causing serious consequences on the world trade market.

The President who wants to make America Great Again

While running for President in 2016, President Donald Trump expressed his intention to end several current trade agreements, promising to bring producing jobs back to the U.S. from alternative nations where they have been outsourced, like China and Asian countries. Once the election started, he embarked on an intensive campaign to revitalise America’s economy with his own vision. Moreover, President Trump asked to pull the U.S. out of the World Trade Organization (WTO), an impartial, international entity that regulates and arbitrates trade among the 164 countries that belong to that.

In early 2018, President Trump stepped up his efforts, notably against China, threatening to issue a giant fine over alleged holding (IP) larceny and important tariffs on Chinese product like steel and soy product, that costs almost 500$ billion. The Chinese retaliated with a lofty tax on over a hundred U.S. products.

us china trade war

Tariffs, Tariffs, and more Tariffs

Throughout the year, the two nations have continued to threaten one another with long lists of planned tariffs on numerous products. In September, the U.S. enforced 100% tariffs. Though China responded with tariffs of its own, the factor that had the most impact on the Chinese economy was the fact that the customs duties were not handled properly and things went out of control.

The tariff war also continued into 2019. Within the spring season, China and the U.S. appeared on the verge of a trade agreement. However, at the start, Chinese officers took a stern approach during the negotiations, refusing to accept the changes in their company-subsidizing laws and insistence on the lifting of these tariffs. Enraged by this apparent retreat, the president doubled down, saying that he was about to increase tariffs from 100% to 125% on $200 billion worth of Chinese imports. The U.S. deficit with China had fallen to its lowest level in 2014.

Trump then declared twenty-five tariffs worth $50 to $60 billion in Chinese exports to the U.S., as well as region, data, communication technology, and machinery. On Monday, China placed fees on a good variety of U.S. products, including scrap metal, vino and apples. Trump then secured tariffs on almost 1300 Chinese products. Hours later, China came out with additional tariffs, now taking aim at Boeing planes, Trump was entertaining the thought of another $100 billion in tariffs.

When whales fight, the shrimps’ backs are broken

As a Korean saying goes, “When whales fight, the shrimps’ backs are broken”. The US-China trade war has negative consequences on the surrounding east and west countries too. Amongst the countries that are most at risks are (Percentages show how much of a country’s exports are part of global supply chains) London, Ireland(59.2%), Malaysia(60.4%), Singapore(61.6%), South Korea(62.1%), Czech Republic(64.7%), Hungary(65.1%), Slovak Republic(67.3%), Taiwan(67,6%) and Luxembourg(70.8%). Due to the Trade war, these countries may potentially lose up to 0.6% of their national economy. Moreover, the Chinese economy may see a slight decline of 6.2-6.4% which will then have a serious knock-on impact on the other inter-connected countries.

us china trade war singapore

Singapore also known as the “trans-shipment hub” is an excellent example of the country who grew due to its trade and globalisation. 90% of ships arriving there are meant to go to another destination, mostly China. From just a small island, it has now become one of the most advanced states in the world. However, if US-China Trade War starts then Singapore will be stuck between two superpowers and will probably fail at finding a way to melt the ice.

On the other hand, some countries may also reap benefits from this trade war. South East Asia has reportedly earned almost 11.8$ billion from January to September of last year, by exporting their footwear to the US. Exporting 405 million pairs of shoes to America makes South Asia the second largest exporter after China according to FDRA data. Indonesia is also earning by exporting footwear to the US and they have exported nearly 105 million pairs of shoes. 

industries at stake us china trade war

The Top 3 Industries Affected by the Trade War With China

Meanwhile, there are some industries which are seeing a heavy downfall due to this trade war.

  1. Automobiles:
    One of the most important areas stricken by trade tensions is the U.S. automotive trade. Last year, China redoubled the tariffs on U.S.-made cars getting into the country. Generally, Chinese shoppers tend to opt for regionally factory-made vehicles. China has suspended the extra twenty-fifth tariffs on U.S. vehicles and machine elements as a goodwill gesture. Carla Balio(Center for Automotive Research’s Corporate Executive and President) said that Tariffs and quotas on cars and automotive elements won’t strengthen the U.S. economy or make the U.S. automakers and suppliers additional competitive within the international market, Prices can rise for U.S. shoppers – notwithstanding they get a U.S.-built vehicle – because of the share of foreign contents utilized in U.S. production.china automotive-industry
  2. Manufacturing (Semiconductors):
    Chip manufacturers that depend on China for sales include NVIDIA firm (NVDA), micrometre Technology (MU) and Intel firm (INTC). Semiconductor suppliers have comparatively high ‘ship-to’ revenue exposure to China. If the fight for technological dominance and the trade war does not cease, China might retaliate with tariffs with different techniques. China’s imports from the U.S. aren’t massive enough to match Trump’s tariffs dollar for dollar. However, the country has different levers it may use, like imposing new taxes and more regulation on U.S. companies, fastness deal approvals, or encouraging voters to boycott US products.US china trade war huawei
  3. Agriculture:
    China is the fourth largest agricultural export marketplace for the U.S. By banning the exports of agricultural products to China, $9.3 billion was ruined in 2018, according to an Official Trade Representative. Historically, China has been the biggest purchaser of U.S. soybeans, with $3.1 billion revenue in 2018. Different agricultural products exported to China in high amount include cotton ($924 million), hides & skins ($607 million), pork & pork products ($571 million), and coarse grains ($530 million). If China slows down or stops its purchases of U.S. agricultural product once more within the future, farmers and connected industries can seemingly feel the squeeze.

Conclusion

The Trade War is being frowned upon by some nations, but not others. But due to political rivalry, it’s being elevated day by day and it can cast serious consequences on the nearby developing counties, disturbing the whole channel of World Trade System. The future is always uncertain, and will yield new developments. What will be the next?

About Moovaz:


Moovaz is revolutionising the international relocation and logistics industry by enabling simple and efficient moving through smart technology. For the increasingly mobile citizen in the globalised world, Moovaz offers all-encompassing relocation services, such that users only need to input the origin and destination, and Moovaz handles the rest. From your goose feather pillows to your 36 gear bike, we ensure that your kit arrives in the same exact condition the day you packed it.

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