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Published: 01:26 AM, 29 September 2019

When will China-US trade war stop? M S Siddiqui

US President

Donald Trump has long accused China of unfair trading practices and intellectual property theft. In China, there is a perception that the US is trying to curb its rise. The trade war start with imposition of tariff on Chinese product export to USA Market and China retaliated.

The U.S. trade deficit with China was $419 billion in 2018. The trade deficit exists because U.S. exports to China were only $120 billion while imports from China were $540 billion. The trade was will reverse 40 years of increased trade, financial and economic integration of the two countries.

US exports to China, mostly pork, soybeans and American-made commercial aircraft, are among the goods that will still be hit by the hefty taxes. The biggest categories of US imports from China were computers and accessories, cell phones, and apparel and footwear. There is a significant US investment in China.

They import a lot of raw materials and products components from USA and export to finished products made from raw materials manufacturers and export to USA that send raw materials to China for low-cost assembly. Once shipped back to the United States, they are considered imports.

The US administration wanted these US investment to bring back to own country to add value in own country to gain most with creation of employment. Meanwhile, chastened U.S. companies

are rethinking supply chains and relocating Chinese-based manufacturing. US tariffs policy aims to encourage consumers to buy American by making imported goods more expensive.

So far, US has imposed tariffs on more than $360bn (£296bn) of Chinese goods, and China has retaliated with tariffs on more than $110bn of US products. China's trade with the United States slipped by 1% in August, official figures showed in recent statistics. Beijing has hit back with tariffs ranging from 5% to 25% on US goods.

China also plans to hit another 3,000 American products with tariffs by the end of the year. Its latest tariff strike included a 5% levy on US crude oil, the first time fuel has been hit in the trade battle. But China released a list of 16 US imports that will be exempted from tariffs including anti-cancer drugs and animal feed.

US administration delivered three rounds of tariffs last year, and a fourth one in September. The latest round targeted Chinese imports, from meat to musical instruments, with a 15% duty. On 1 October 2019, the US plans to raise an existing 25% tariff on some Chinese products to 30%. Washington then plans to deliver a wave of new tariffs on Chinese goods, ranging from footwear to telephones.

Recently, US President Donald Trump has again accused China of using predatory tactics, including forcing foreign companies to hand over technology and stealing trade secrets. The dispute has weighed on global markets and soured relations between Washington and Beijing.

As the two sides prepared for a further round of negotiations, China's trade surplus also dropped sharply last month to $34.83 billion (€31.32 billion), from $44.58 billion in July 2019, while imports continued a four-month decline at 5.6%.

The impacts on the trade war on both the economies have surfaced already. The Chinese currency continues to slide as Beijing seeks to buffer against US tariffs. The People's Bank of China has allowed the Yuan to depreciate to offset US tariffs and keep its export engine running amid a domestic and global economic slowdown. A lower Yuan makes Chinese exports relatively cheaper.

US economic growth was forecast to slow to an annualized rate of 1.7% by end-2020 from the 2.0% . The U.S.-China trade war will worsen or at best stay the same over the coming year and US Federal Reserve already cut cut interest rates to face recession surfacing in the economy.

Goldman Sachs economist Andrew Tilton, who has published excellent empirical research on the trade war, estimates that the initial rounds of tariffs that took effect before August 1 2019 have reduced Chinese gross domestic product by 0.4 per cent, via the direct trade effects alone. One US financial service provider, JP Morgan, had predicted that Trump's latest move would cost the average household approximately $1,000 a year.

Negotiations are ongoing but have proven difficult. The two sides remain far apart on issues including how to roll back tariffs and enforce a deal. The uncertainty is hurting businesses and weighing on the global economy. Global markets are rattled by an intensifying US-China trade war.

A few days back, Trump declare delaying by two weeks a tariff increase on $250 billion of Chinese goods planned for October 1, the 70th anniversary of the People's Republic of China, is unlikely to slow this trend, and neither will China's responding exemption of pork and soybeans from new tariffs. US President Donald Trump will delay a planned tariff hike on $250bn (£202.8bn) of Chinese goods as a "gesture of good will".

President Trump's trade policies are resulting in an economic slowdown that could endanger his re-election and thus his revived efforts toward a solution. Yet, it remains unlikely that any major deal can reverse this downward trajectory in bilateral relations in any lasting manner, even as China and the United States open the 13th round of trade talks sometime in October.

Some analysts still argue that the latest gestures by the US and China have not brought a resolution to their trade row much closer. "A broad settlement is not in sight," Gary Hufbauer of the Peterson Institute for International Economics said. "Beijing is prepared for a continuation of tariffs and hostile rhetoric through 2020.

And Trump cannot back down without getting a storm of criticism from the hawks, both Democrats and Republicans."Issues around technology transfer have been key during trade talks between the world's two largest economies in recent months.

China has traditionally been reliant on U.S. suppliers for key tech components such as chips and software, as well as modems and jet engines, but recent developments in the two countries' protracted trade war have strained those ties and affected businesses from both sides. The US-China rivalry is likely to play out next in the crucial technology sector, analysts say, as both sides try to establish themselves as the world's technology leader.

This rivalry is far more difficult to resolve than pure trade issues. Many say the US-China technology battle is already under way - and China's tech giant Huawei is at its very centre. Huawei has been the focus of intense international scrutiny lately, with the US and other countries raising security concerns about its products.

The US has restricted federal agencies from using Huawei products and has encouraged allies to shun them. "The term 'cold war' is overused in the context of overall US-China tensions, but is increasingly accurate in describing their technology competition," says Mr Hirson.

"China will never trust the United States again, and it will achieve its technology independence within seven years," David Roche, Independent Strategy's president and global strategist, told CNBC's "Squawk Box."

By this time China preparing them to face the shortcoming in technology. For instance, it is setting up on chips industry. Under the government-led Made in China 2025 initiative, the country aims to produce 40% of its semiconductors by 2020, and 70% by 2025.

Currently, only 16% of the semiconductors used in China are produced domestically, according to a February 2019 report from the Center for Strategic and International Studies. Just half of those are made by Chinese firms.

There are no real winners in this US-initiated trade war. Countries facing new tariffs, including the USA, experience declines in real exports and GDP.

Other countries are hit indirectly through weaker demand for their own exports, either through supply chains or in response to weaker global economic growth. These effects outweigh any potential gains from trade diversion to avoid tariffs.

The changes in the geopolitical relationship between the United States and China through this trade war have alarmed many countries that have trade stakes with these two nations-though this raises hope for Bangladesh. As the Asia Development Bank's chief economist Yasuyuki Sawada argues, "Trade war to generate additional USD 400 million exports for Bangladesh."

By this time the trade war between two biggest economies has reduced the level of global real GDP is reduced 0.1% this year, 0.8% in 2019, and 1.4% in 2020. Thus, global economic growth in 2019 and 2020 is only marginally above our 2.0% threshold for a world recession. All are concerned of the trade war.

The founder of Alibaba Jack Ma said that the war will continue for 20 years. The trade war takes a new tern to a war of supremacy of technology. It has been presumed that the next new administration in Washington even cannot withdraw the trade war and it will continue till the raise of China to number one economy of the world toppling USA or until loss of relevance of such war to both the parties. The writer is a legal Economist Email: mssiddiqui2035@gmail.com