Group_5_US-China Trade War to understand the trade

Macroeconomics

1. Group 5 Garima Mathur- 2314018 Rahatul Ashafeen - 2314036 Rajeev Ranjan Kumar - 2314038 Sandeep Solanki- 2314046 Vijay Vasha - 2314062 US- China Trade war

2. Acknowledgement We would want to convey heartfelt gratitude to our Prof. Ranojoy Basu , for his invaluable advice and assistance in completing our project. He was there to assist us every step of the way, and his motivation is what enabled us to accomplish our task effectively.

3. Table of content Trade War? The origin of Trade war Important events Gain & Loss for China & US Impact on India Global ramification Measures Taken Economy post measures taken Analysis

4. Trade War? A n economic conflict resulting from extreme protectionism . Protectionism, is the economic policy of restricting imports from other countries. A Series of steps taken to tighten economic policies. Flexing economic muscle power on geo-political forum.

5. The Origin of US-China trade war Key Observations: Trade deficit “Ballooning” Currency manipulation Intellectual property theft accusation. Other probable cause(s): Large scale economic activities by China like :- Belt and Road Initiative , Asian Infrastructure Investment Bank, Made in China 2025

6. Trade Deficit The US imported a record of 539.5 billion USD in goods from China and exported 120.3 billion USD. The trade deficit accounted for 419.2 billion USD. China forms the largest part of the US trade deficit. A threat to US jobs and national security.

7. Trade Deficit Goods: Deficit by $891 bn Services: Surplus by $270 bn Total: In total deficit of $621 bn

8. Currency Manipulator Key Pointers: China has been accused of ‘pegging’ its currency to the USD at weak rates. Since 2017, China has partially slowed down this practice. Cheaper and therefore attractive Chinese exports.

9. Intellectual Property Theft Accusation A claim by USA, the annual costs from the loss of intellectual property ranges from $225 billion to $600 billion. US to apply Section 301 of the Trade Act (1974). Section 301 investigates forced transfer of technology from American companies to be allowed to do business in China. Stolen trade secrets, pirated software and counterfeiting China forced American companies to transfer technology to access the Chinese market, which were violations of WTO rules The espionage and theft would not be limited to business, but also include academia and government.

10. Important events

11. Gain and loss China Gains: Lower dependence on the US economy on the growth of China’s GDP. Losses: Lower export surplus. Shanghai Composite (SSE) fell by 17% since 2018. 25% export loss (35 billion dollars): Chinese firms were competitive enough to maintain 75% of their exports despite tariffs The trade war has indirectly caused some companies to go bankrupt. One of them, Taiwanese LCD panel manufacturer Chunghwa Picture Tubes (CPT). China’s reputation on a global scale. The most substantial losses are in China, as both foreign and domestic investors will take a more cautious approach to capital spending in China. The US Gains: Low unemployment rates due to better self dependency. Bull-run in the US stock market. Lower trade deficit. Losses: Hurts the agricultural sector. Rising cost of imported materials for manufacturing. Economic slowdown (temporary/possible trend)-Real U.S. GDP has decreased by about 0.3%, reduced real consumption by 0.3%, reduced real private investment by 1.3%, and reduce real household income by $580 (about 1%) Uncertainty has caused turbulence in the stock market, with investors "rattled" by the conflict

12. Gain and losses: Stock Market perspective

13. Gain and losses: Global Trade Volumes

14. Gain and losses: Economic Sectors hurt

15. Effect on India India had both opportunities and challenges Opportunities India’s share of world exports rose to 1.71 percent in the first quarter of 2019 from 1.58 percent in the fourth quarter of 2017. Chinese imports of Indian goods surged 31% in the past year mainly due to substitution of US exports to other Asian economies. Challenges The Indian Rupee has depreciated due to higher current account deficit and lower FDI because of the trade war. I mports are growing more expensive due to the weakening of the rupee .

16. Global Ramification The level of global real GDP has reduced 0.1%in 2018, 0.8% in 2019, and 1.4% in 2020. Real global exports of goods and services has decreased by 2.4% . The sharpest declines in real exports occur in China and in the North American countries. 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%. Due to the high import content of its exports, China also experiences a significant drop in real imports, which fell to 3.2%. Vietnam is by far the largest beneficiary, gaining 7.9% of GDP from trade diversion, where trade diversion is mostly additional U.S. imports Vietnam is the biggest beneficiary, with technology companies moving manufacturing there. For the next top three, Chile, Malaysia and Argentina, the trade diversion is mostly additional China imports. South Korea has also benefited from increased electronics exports. Malaysia from semiconductor exports, Mexico from motor vehicles, and Brazil from soyabeans exports

17. % Change in US Import

18. Gain and losses Globally

19. Measures Taken Tariff rollback: The deal cancels the tariffs originally set to take effect on December 15, 2019 that would have affected mass consumed Chinese-made imports like cellphones, toys, and laptops. Expanding trade and services: A centerpiece of the deal is China’s pledge to purchase a minimum of 200 Billion USD worth of additional US goods and services over the next two years. The agreement contains provisions to protect confidential information considered to be trade secrets. The agreement also calls for China to submit an “Action Plan to strengthen intellectual property protection” Technology transfer: The two countries also agreed to a provision that would prevent either government from directing or supporting domestic companies to acquire foreign technology that could create “distortion” in sectors and industries Currency: The deal prohibits both the US and China from manipulation of exchange rates or interest rates to devalue their respective currency. China also agreed to publicly disclose its foreign exchange reserves and quarterly imports of goods and services US and China sign deal to ease trade war

20. Economy post measures At the end of 2019 the two countries agreed on a truce leading to the so-called Phase One Agreement signed in January 2020, which reduced some tariffs and committed China to increase its imports of US products. US exports are falling farther and farther behind foreign peers also selling into the Chinese market US exports to China barely reached pre-trade war levels even by 2021. The U.S.-China Trade War Has Become a Cold War China's trade war with US resulted in loss of USD 550 billion

21. While the US administration's position that the Chinese do not abide by fair and transparent rules for global trade was broadly correct, employing unilateral tariffs is a self-defeating approach, and the administration should instead pursue a coalition-based trade strategy. The Trade War led to the ongoing economic slowdown and, eventually, recession. The tariffs are not the solution to stop China from violating IPR as per agreements. Smoot-Hawley Tariff 1930 The US-China trade relationship supports about 2.6 million US jobs. Bystander countries increased their exports of taxed items by an average of 6.7% during the period studied compared with non-taxed products. Analysis

22. References https://www.statista.com/ https://www.reuters.com/article/us-usa-trade-china-timeline/timeline- key-dates-in-the-us-china-trade-war-idUSKCN1UZ24U https://www.cfr.org/timeline/us-relations-china https://www.investopedia.com/articles/forex/030616/why-chinese-yuan-pegged.asp https://www.thebalance.com/trade-wars-definition-how-it-affects- you-4159973 https://en.wikipedia.org/wiki/China– United_States_trade_war https://www.gtap.agecon.purdue.edu/events/Short_Courses/2018/documents/Trade.pdf

23. Any Queries