What Is Happening with the US-China Trade Wars?

What Is Happening with the US-China Trade Wars?

Ever since he became US president in 2016, Donald Trump has been complaining about the way that China conducts its world economic and business policies. Only a year after taking office, he took action by imposing a series of tariffs of up to 25% on Chinese imports. Not only did this play out well for his supporters but the idea was that American-made products would be cheaper and encourage consumers to buy domestic products rather than Chinese imports.

However, it didn’t take China long to retaliate. In their turn, they imposed 110 billion dollars’ worth of tariffs of 5-25% on American imports. This started what has been called the largest trade war in world history and was openly criticised by the IMF. Their spokesperson said that this harmed both American and international firms and the trade war could potentially weaken the entire global economy.

Underlying the criticism of the way that China does business globally is the very real fear that a country with a strong economy is a potentially powerful rival on the world stage. In addition, economic strength can be the basis for building up a strong military too. Even at the height of the Cold War with the USSR, the US was never threatened economically in the same way as it is by China. The statistics speak for themselves. Only 10 years ago the US economy was triple the size of China’s but not any longer. This rapid growth, helped by China’s ‘Belt and Road’ initiative, has allowed it to develop close economic ties with many countries, especially those in the developing world. Among other benefits, these relationships give the country easy access to raw materials and ready markets for their products.

 

On their side, China has been resentful of America’s attitudes and political rhetoric. Not only do they view these attacks as an attempt to constrain their economic development but as a form of bullying which constitutes interference on the autonomy of the country and its strategic planning. After months of measures and countermeasures, economic experts expressed their optimism when new trade levies were halted at the end of 2018 and the two countries met for talks. They were quietly confident that a deal could be reached. However, President Trump’s attack on the Chinese high-tech firm, Huawei has rekindled the conflict.

 

In an era of hacks and scams, the worry about the security of personal data (as epitomised by the recent European enactment of the GDPR), Trump specifically targeted Huawei. He has accused the company of having tooclose ties with the Chinese government and expressed cybersecurity fears about its key information systems. The worry is that its software could include ‘backdoors’ which has the potential to give the Chinese government access to confidential information. As a result of these concerns, he imposed a presidential executive order to blacklist the company and cut off its ties with US partnerships.  Huawei has strenuously denied any wrongdoing saying that it respects all existing laws and regulations and has accused the American president of bullying. Some political commentators have seen this move as one of Trump’s shock tactics to force China back to the negotiating table as well as playing towards his domestic audience.

The major shock after his decision was the announcement by Google that they would comply with this blacklisting and withhold Android updates from Huawei. With an estimated half a billion people owning a Huawei mobile phone, the company is the second largest phone manufacturer after Samsung so Google’s announcement has the potential to affect phone users across the globe. Although Android is open source and would continue to operate on existing devices, the company would be locked out of new updates and future access to Google-controlled add-ons such as Gmail and Google Play Store.How things will play out from here is anyone’s guess although many are reassured by Trump’s record of inconsistency – backtracking after such grandstanding and then declaring a victory.

The truth is that partnerships between international tech firms are highly beneficial for all companies concerned and work across borders rather like the internet itself. From ecommerce to a direct lender with high acceptance rates, the electronic world ignores all borders. If an American-Chinese trade war could theoretically have an impact on every single country in the world, how much more damage can be done by undermining lucrative tech partnerships in this way.

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