US-China Trade War: Who Won?

The US-China trade war has come to a halt after President Donald Trump, on January 15th, inked what is being called a “phase one” trade agreement with China. The long-awaited agreement brings more than 18-month of trade war to an end, leaving the world’s two largest economies in a mess. For the White House and a lot of Congress members, the deal appears to be a good one. The agreement outlines the steps to be taken in order to root out several practices that marred the US economy, including forced technology transfers and intellectual property theft. Another significant point in the agreement is the entailing $200 billion increment in Chinese purchases of U.S. goods over the next two years.

However, as the US and China lower down their arms, analysts are now debating over who really benefited from the war between two global economic superpowers. This article briefly reads about everything the US-China trade war entailed.

The Inevitability of US-China Trade War

Even though the US-China trade war only started in July 2018 after the US imposed a round of tariffs on $34 billion worth of Chinese goods, many who have been observing the two countries closely believe that the collision course was already set for many years now.  The truth is that the current trade dispute is a result of the outright technology theft stunts and forced technology transfers, which has long been overlooked under the pretense of free trade and capital flows. On the other side, the Chinese lobby believes that the US cannot stand China’s rising authority as a global economic power. Things changed when the President’s office went to Donald Trump in 2016. President Trump’s belligerence toward free trade policies was no secret.

Trump consistently targeted China for its unfair and predatory trade practices. The Trump administration levied three rounds of tariffs in 2018, and a fourth one in September 2019. The latest round aimed at Chinese imports, from meat to musical instruments, with a 15% duty. Throughout the whole trade row, President Trump remained up in arms, threatening every now and then to levy tariffs on another $500 billion worth of Chinese goods.

Phase 1 Agreement – Trade Deal

The Phase 1 agreement is being hailed as a stepping stone in the efforts being made to end the US-China trade war. Upon signing the agreement, President Trump said that the U.S. and China are “righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers, and families.” Chinese Vice Premier, Liu He, referred the trade deal as “good for China, for the U.S. and for the whole world,” Here are some of the significant deliverables from the deal, as pointed out by CNBC (read the full agreement here):

• China is required to submit an “Action Plan to strengthen intellectual property protection” not later than 30 days of the agreement taking effect, according to the trade pact. The blueprint of the proposal would include “measures that China will take to implement its obligations” and “the date by which each measure will go into effect.”
• The deal gives companies the freedom to operate “without any force or pressure from the other Party to transfer their technology to persons of the other Party.” Technology transfers “must be based on market terms that are voluntary and reflect mutual agreement,”.
• China will spend $200 billion more in the purchases of U.S. manufacturing, energy and agricultural goods and services over the course of two years.
• The agreement makes commitments to try to eradicate the sale of counterfeit goods.
• Provisions to encourage Chinese market access to financial services firms.

Real Winner – the US or China?

Interestingly, a report released by economists at the Japanese investment bank, Nomura indicated at a different beneficiary of the entire US-China trade war. In a tit for tat situation, American and Chinese importers started increasingly sourced goods from third countries like Vietnam, Malaysia, Taiwan and others to support their respective governments in the trade row. According to the report, Vietnam emerged as the biggest beneficiary of the US-China trade war, increasing its exports to both China and the US. In fact, the Vietnamese GDP gained 7.9% of the trade war alone. Taiwan, Chile, Malaysia and Argentina were also on the list of beneficiaries.

Be that as it may, the US-China trade war has some serious implications on the two of the world’s biggest economies. The only plausible way for the US and China to recover from the damage is to quickly move towards a concrete trade deal and seal it!

Learn how the US-China trade war and many other factors portrayed the Oil and Gas Industry Outlook 2020.