Probing the US-China Trade War: Who is Winning? by Mario Biscocho
On August 7, 2018 at 11:03 am, US President Donald Trump tweeted, “The United States hasn’t had a Trade Surplus with China in 40 years. They must end unfair trade, take down barriers and charge only Reciprocal Tariffs. The US is losing $500 Billion a year, and has been losing Billions of Dollars for decades. Cannot continue!”
The underlying message of the said tweet pertained to unfair trade practices which covered the following: intellectual property (technology transfer), government subsidy, price dumping, restrictive competition, currency manipulation, and high trade barriers. And the implicit consequences on the US were the following: trade imbalance, lost jobs and employment, threats to national security, suspected espionage activities, and technology supremacy.
By July 2018, the US imposed its first China-specific tariffs, demanding structural changes to improve trade imbalance. But China retaliated with tariffs in kind. Since then, two of the world’s largest economies have been imposing tariffs on each other’s goods, costing both economies billions of dollars. According to Reuters, since then, the United States has imposed tariffs of at least $550B worth on Chinese products, including washing machines, solar panels, steel, etc. China retaliated by imposing tariffs of $185B worth on US goods and agriculture products. On October 1, the US released a new set of products that will be subjected to additional tariffs amounting to $200B.
The US and China are said to have reached a “tentative agreement”, while skeptical views over the terms of the trade deal obscure growth prospects. As a result of the trade conflict, the global business environment has been seen as unfavorable due to slowing demand in investment and trade as uncertainty and geopolitical risks abound.
As a result, the International Monetary Fund (IMF) has downgraded its world economic outlook, as follows:
The above recalculation by IMF of the GDP growth of the above economies does not augur well for the world economy. However, the direct trade war between the US and China might inadvertently benefit ASEAN, as the trade could be diverted to the countries in this region — the region can trade directly with either the US or China. In fact, what is projected to do well amidst this trade war is manufacturing, notably electronics. The Philippines, an intermediary country in the trade, sources 20% of inputs from China for electronics manufacturing, while the country exports 50% of its electronics output to the US.
But while the UNCTAD study expects the Philippines to capture about 3.2% of the trade diverted from the US and China, the US-China Trade War has limited impact on the Philippines as its economy is driven by domestic demand, while exporters may experience growing or slowing demand.
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About the author:
Mario is the Senior Vice President and Managing Director of the Executive Search and Selection Division, and HRD Consulting Division of John Clements Consultants, Inc. He has been with the company since 1986, initially handling sales and business development. Mario has also taken leadership positions in other John Clements business units: Professional Staffers and PT John Clements Indonesia.
Mario received his undergraduate degree in business management from the Ateneo de Manila University, and he has earned MBA units from the Ateneo Graduate School of Business. He has attended numerous training and development programs, locally and internationally.
