Trade Conflicts / Trade Wars / Trade disputes

US-Ch i n a T r a de Wa r s
 Trade Disputes/Trade Wars /Trade Conflicts

A trade war is an economic conflict resulting

from extreme protectionism in which states
raise or create tariffs or other trade barriers
against each other in response to trade barriers
created by the other party.
 Trade Disputes
Key Takeaways:
A trade war occurs when one country retaliates against another by raising import
tariffs or placing other restrictions on the other country's imports.
Trade wars are a side effect of protectionist policies and are controversial.
Trade wars protect national interests and provide advantages to domestic businesses.
Critics of trade wars claim they ultimately hurt local companies, consumers, and the
economy.
 Understanding a Trade War

Protectionism: Trade wars are usually considered a side effect of protectionism.

Protectionism refers to government actions and policies that restrict international trade. A
country will generally undertake protectionist actions to shield domestic businesses and jobs
from foreign competition.
Trade Deficits: Protectionism is also a method used to balance trade deficits. A trade deficit
occurs when a country's imports exceed the amounts of its exports. A tariff is a tax or duty
imposed on the goods imported into a nation.
In a global economy, a trade war can become very damaging to the consumers and
businesses of both nations.
A trade war that begins in one sector can grow to affect other sectors. Likewise, a trade war
that begins between two countries can affect other countries not initially involved in the trade
war. As noted above, "tit-for-tat" battle can result from a protectionist penchant.
 Understanding a Trade War
Trade War and Sanctions: A trade war is distinct from other actions taken to control
imports and exports, such as sanctions. Instead, the trade war has detrimental effects on the
trading relationship between two countries because its goals are related specifically to trade.
Sanctions, for example, may also have philanthropic goals. The OPEC oil embargo on the
US, imposed between 1973 and1974 in response to the US support for Israel during the
Arab-Israeli War.
In addition to tariffs, protectionist policies can be implemented by placing a cap on
import quotas, setting clear product standards, or implementing government subsidies
for processes to deter outsourcing.
 History of Trade Wars

Trade wars are not an invention of modern society. For example, colonial powers fought
with each other over the right to trade exclusively with overseas colonies in the 17th century.
The British Empire has a long history of such trade battles. An example can be seen in the
opium wars of the 19th century with China. The British had been sending India-produced
opium into China for years when the Chinese emperor decreed it to be illegal.
In 1930, the United States enacted the Smoot-Hawley Tariff Act, raising tariffs to protect
American farmers from European agricultural products. This act increased the already hefty
import duties to almost 40%. In response, several nations retaliated against the United States
by imposing their own higher tariffs, and global trade declined worldwide.
Beginning in January 2018, former President Trump imposed a series of tariffs on
everything from steel and aluminum to solar panels and washing machines. These duties
impacted goods from the European Union (EU) and Canada, as well as China and Mexico.
Advantages and Disadvantages of a Trade War

PROS CONS
•Protects domestic companies •Increases costs and induces
from unfair competition inflation
•Increases demand for domestic •Causes marketplace shortages,
goods reduces choice
•Promotes local job growth •Discourages trade
•Improves trade deficits •Slows economic growth
•Punishes nation with unethical •Hurts diplomatic relations, cultural
trade policies exchange
 Dispute settlement of WTO

Resolving trade disputes is one of the core activities of the WTO. A dispute arises
when a member government believes another member government is violating an
agreement or a commitment that it has made in the WTO.
The WTO has one of the most active international dispute settlement mechanisms in
the world. Since 1995, 611 disputes have been brought to the WTO and over 350
rulings have been issued.
Participation of WTO members in dispute
settlement (1995 – 2021)
 D u r i n g t h a t p e r i o d ,  5 1  W T O
members i ni t i a t ed a t l ea s t o ne
dispute, and 60 members were a
respondent in at least one dispute.
 In addition, a total of 90 members
have participated as third parties in
proceedings between two or more
other WTO members. 
 Overall, a total of 110 members
have been active in dispute
settlement, as a party or a third
party.
Requests for consultations (1995 – 2021)
Agreements raised in WTO disputes (1995-2021)
Number of disputes initiated, original panels established
and notifications of appeal in original proceedings
 The trade war between the two
superpowers, USA and China
emanated when the US imposed
three rounds of tariffs on Chinese
p ro d u c t s 2 0 1 8 , totaling $ 2 5 0
billion worth of goods.
 The combined US tariffs
applicable exclusively to
China are US $250 billion.

 China retaliated in kind by

announcing tariffs worth
US $110 billion.
  WHYUSHASAPROBLEMWITHCHINA?

 While US have threatened most of the EU and NAFTA

nations with tariffs, the real target was obviously China.
 KEY TAKEAWAYS
 The economies of the United States and China are intricately linked, due to the two
nations sharing the second-largest trading partnership of goods and services.
China was the United States largest creditor.
Chinese impact on the oil process can benefit
the United States in the short term as the states
can enjoy decreased oil import price.
Low production cost and cheap labor are
negatively effects the export market of the
United States.
The economies of the United States and China
are complicatedly linked due to the two nations
sharing the second largest trading partnership of
goods and services.
 Solar panel and Washing Machines

 Two companies begged the US Govt to raise

tariffs on imported solar panel.
 In January 2018, the Trump administration
announced it would begin imposing tariffs on
washing machine and solar cell and module imports
 They estimated that the solar cell and module tariffs
amount to a $0.78 billion tax increase based on 2018
import values and quantities
 The 25 percent tariff applies to all imports above a
2.5 gigawatt exemption.
 Solar panel and Washing Machines

 The triumph Administration slapped a 30% tax on

imported solar cells and panels. The US decision to
subsidize renewable energy firms and impose tariffs on
imported products and it effect global market.
 We’ve estimated that the washing machine tariffs amount
to a $0.59 billion tax increase based on 2018 import
values and quantities.

 The United States imported $1.29 billion of

machines and $114 million worth of parts in 2018.
 A tariff of 18 percent applies to the first 1.2 million
washing machines imported and a tariff of 45
percent applies to all subsequent washing machines
as well as parts.
 September 21, 2011: Before Running For President, Trump Tweets “China Is
Neither An Ally Or A Friend — They Want To Beat Us And Own Our
Country.” The Tweet Is Among Several Statements He Makes Criticizing
China’s Trade Practices Before Running For President.

 May 2, 2016: While Campaigning For The Republican Party’s Presidential

Nomination, Trump Says “We Can’t Continue To Allow China To Rape Our
Country And That’s What They’re Doing. It’s The Greatest Theft In The
History Of The World.”
August 18, 2017: The USTR Initiates
An Investigation Into Certain Acts,
Policies And Practices Of The Chinese
Government Relating To Technology
Transfer, Intellectual Property And
Innovation.

November 8-10, 2017: Trump Pays A

“State Visit Plus” To China Where
Relations Were Considered To Have
Warmed.
 December 14, 2018 – China To Temporarily Lower Tariffs On US Autos; Resumes
Buying US Soybean Exports. China’s Ministry Of Finance Announces That It Will
Temporarily Remove
• Additional 25 Percent Tariffs On US Autos And Five Percent Tariffs On Certain
US Auto Parts For Three Months, Beginning On January 1, 2019. During This
Period, US Auto Imports Will Be Subject To China’s Standard 15 Percent Tariff
Rate On Foreign Autos.

 December 13, 2019 – US, China Agree To ‘Phase One Deal’ Just Before Next
Tariff Hike
• China And The US Announced They Had Reached A Phase One Trade Deal focus
on The Mass Of Consumer Goods, Including Popular Electronics Like Smartphones
And Laptops.
Effects

Domestic politics:
 Analysts speculated that the trade war could affect the2020 United
States presidential elections, as tariffs have negatively affected
farmers, an important constituency for Donald Trump and Xi
Jinping may also face domestic political pressure.

 Globally:
 The trade war has hurt the European economy, particularly
Germany, even though trade relations between Germany and China
and between Germany and the U.S. remain good.
 Some countries have benefited economically from the trade war, at
least in some sectors, due to increasing exports to the United States
and China to fill the gaps left by decreasing trade between these
two economies. Beneficiaries include Vietnam, Chile, Malaysia,
South Korea, Mexico, Brazil and Argentina.
 U.S agricultural exports to China dropped by more
than half in 2018.
 Rise in financial stress adversely affect new credit
flows and restrain investment, industrial
production and trade.
 China has to pay more tariffs on the products
exported to U.S.
 Decrease in demand for China products in
U.S.
The U.S – China trade dispute is a long-term issue, and perhaps an example of a
broader changing bilateral.

However, there is still a huge potential for trade and investment co-operation,
considering the strong complementarity of the two economies.

The two countries have responsibility to maintain the stability of global trade
system and should solve the trade conflict through multilateral mechanism. No
one wins a trade war. The US-ASEAN Business Council CEO Alex Feldman
states that "It's in everyone's interest to see this spat get resolved and go back to
normal trade relations between the US and China."
 Assignment & Presentation
Why US involved in trade disputes/ conflicts?
Discuss the above questions as Complainant (section-A) & Respondents (section-B)
With how many countries this particular country involved in trade disputes
Brief summary of each cases.(1 to 200 words)
Products/services, trading partners
What kind of trade restrictions imposed.
Do the trading partners retaliate or tit for tat strategy use?
Effects of the trade conflicts on the particular country (US) and it’s trading partners.

Please check this link for trade disputes data of countries:

[Link]
 For Section A: Group Work (6 to 8)
US Trade Disputes Cases
US as Complainant
First case DS3 to DS37 (COMP) DS 338 to DS 389(COMP)

DS41 to DS74 (COMP) DS 394 to DS 450(COMP)

DS 76 to DS 115 (COMP) DS455 to DS511 (COMP)

DS124 to DS 158 (COMP) DS517 to 542 (COMP)

DS164 to DS 195 (COMP) DS 557 to DS 585 (COMP)

DS196 to DS260 (COMP)

DS275 to DS334 (COMP)
 For Section B: Group Work (6 to 8
member)
US Trade Disputes Cases
US as Respondent
First Case DS 2 to DS 85 (RESP) DS 368 to DS 422 (RESP)

DS88 to DS 152(RESP) DS 324 to DS 505 (RESP)

DS 160 to DS 194 (RESP) DS 510 to DS 546 (RESP)

DS 200 to DS239 (RESP) DS547 to DS 597 (RESP)

DS 243 to DS 262 (RESP)

DS264 to DS 317 (RESP)

DS319 to DS 365 (RESP)