The trade imbalance between China and the US stems from the US dollar’s global reserve currency status and import tariffs cannot alleviate that situation.
" Although China sees the dispute to be mainly trade issues, the US is concerned about China’s tech supportive policy and intellectual property rights protection.”
Only if the US is willing to sacrifice the USD’s dominance or the world shifts to an RMB regime will economic order be restored.
What is clear is the trade disputes reflect fundamental differences between the US and China.
While the US adopts a unilateral approach, China advocates multilateral platforms such as the World Trade Organisation (WTO). But the United States Trade Representative (USTR) has questioned China’s WTO commitments for many years.
Although China sees the dispute to be mainly trade issues, the US is concerned about China’s tech supportive policy and intellectual property rights protection. The US (and allies) do not welcome China’s overseas acquisitions and 5G initiatives, citing national security issues. China views this as a policy of containment and a challenge to its national dignity.
Hurting global supply chains
Exports to the US represent 22 per cent of China’s total exports and 2.7 per cent of GDP. ANZ Research expects a 25 per cent increase in tariffs on Chinese goods to cause a 20 per cent decline in shipments, detracting 0.5 percentage points from China’s gross domestic product (GDP).
President Trump has threatened to expand tariffs to all Chinese goods which are mostly consumer electronics products, including mobile phones and laptops.
Global electronics supply chains have been disrupted and manufacturers will begin to accelerate shifts in production away from China to places like Southeast Asia, especially for low margin, unsophisticated products.
US buyers have also likely suffered from higher prices due to import tariffs in 2018, according to US-based economists.