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The trade war between the United States and China, a battle which could hurt many countries

The measures taken a few days back by President Donald Trump over Chinese imports will soon come into effect. In essence, it is an initial tariff of 10% over a series of products that belong to six categories: electromechanical, textiles and clothing, chemicals, agricultural and pharmaceutical products (Xinhuanet, 23/09/18) representing a consumption equivalent to US$2 billion.

This measure received an immediate response from China, which imposed import tariffs to U.S. products for a sum of US$ 60,000 million, a reaction which could lead to what Trump has called a “third phase”, which could mean imposing more taxes accounting for US $267 billion (Univisión, 18/09/18).

It looks like if we were attending an unprecedented trade war in the recent history of capitalism, preceded only by the cohabitation of the Soviet bloc and the western powers, whose most significant expression was the space war, clearly, besides the arms race. The trade war has been dubbed by some as the “new cold war” (The New York Times, 19/09/18).

The reasons provided by the Trump administration to take these measures lie on the persistent discomfort by the measures taken by the Chinese government in foreign trade and intellectual property, which the U.S. considers disloyal trade practices.

On the other hand, China thinks the behavior of the United States is attacking the bases of world free trade and accuses America of “trade harassment” (CNN EN ESPANOL, 17/09/18), and in order to “safeguard its legitimate rights and interests and the world free trade order” it had no other alternative but responding in the same manner(Andrew Galbraith and Luoyan Liu, The Independent, 21/09/18).

In face of an increase of the trade balance deficit of 12.1%, equivalent to US$566,000 million, in which China has a little more than US$375,000 million (Sputnik, 03/06/18), the intention of Trump is, according to his own words, to protect the employment of American workers by revamping U.S. industrial activity.

According to The Independent (18/09/18 and some analysts, inclusively close to the White House, Trump’s intention goes beyond reestablishing “fair” trade. As he told Apple when they voiced their concern that these measures would have a final bearing on the American consumer, as many products are assembled in China.

President Trump acknowledged that Apple prices could go up as a result of the "massive tariffs" he's proposing on China but rather than accepting blame for a potential hike on popular consumer items, he said the company should move production to U.S. shores” (The Independent, 09/09/18).

On its part, China has the firm proposal of continuing with its “Made in China 2025”program which it wants to position as a country leader in high technology, such as robotics and artificial intelligence, by way of what is known as “reverse engineering” which in their perception is a mechanism of technological transference to consolidate its national technological capability. Furthermore, China persists in its Belt Road Initiative, looking to expand its trade ties.

A war which could damage many economies

Former White House aide Steve Bannon says, ‘Trump won’t back down’: The U.S. president plans to make trade war unbearable for China and bigger than ever (South China Morning Post, 21/09/18).

This perspective is what could have led Jack Ma, owner of the Alibaba Group, to say his company can no longer meet its promise to create one million jobs in the United States due to U.S.-China trade tensions and that he does not see a short or long term solution (The New York Times, 19/09/18; Univisión, 20/09/18; NBC News, 20/09/18).

The bet on which of the two economies will be more affected by this trade war are hard to anticipate. In part, there is resentment in both countries, and without doubt, continuing with this dynamic will depend on the resisting capability of their respective productive apparatuses.

For now, they will not be the only losers. The Organization for Economic Cooperation and Development (OECD) had estimated a world growth for 2018 and 2019 of 3.7%. However, as a consequence of this trade war, they lowered their forecast to 0.1 and 0.3 percentage points respectively (The Guardian, 20/09/18).

This trade war scenario between two world superpowers would impact, almost without exception, all the world economies. During the last crises, held by industrialized countries, the developing countries have had to support the greatest loads, as their exports continue to depend significantly on commodities.

Colombian exports could face a backlash of a depression of the world economy as the protectionist measures taken by the United States are not exclusive to Chinese imports, but have impacted inclusively European and American countries  (i.e. Canada and Mexico), and Colombian exports could be exposed to have a similar treatment which could impact U.S. company competitiveness.

 

Consejo Editorial