The conflict between U.S and China (https://wspaper.org/article/20889)

The U.S and China have the first and second largest economies in the world. But, these two countries take different path in trade. The U.S has been unable to avoid a trade deficit for decades. On the other hand, Chinese trade surplus has been growing steadily. It means that China is on the rise and the U.S is on the decline. The biggest reason in this gap is because of direct trade relations between the two countries. The U.S. imports a lot of Chinese goods, but exports very few to the Chinese market.

U.S President Donald Trump pointed to the issue and claimed that China had taken away American jobs even before his inauguration. As a pledge, he promised to slap 45 percent tariffs on Chinese products and began implementing tariffs after his election. He imposed 25 percent tariffs on $34 billion worth of Chinese imports. China did not back down and imposed retaliatory tariffs on U.S products. The trade war has heated up after the U.S also raised tariffs again.

The U.S said that all these means are in response to Chinese unfair trade practices. U.S president Donald Trump has consistently argued that China has severely interrupted ‘fair trade’ by using monopoly power and also ‘U.S intellectual property rights’. He said structural problems, such as widening inequality in the U.S and declining manufacturing jobs, have resulted due to deepening U.S trade deficits from Chinese market activities.

U.S raised charges against Chinese companies, such as telecom equipment maker Huawei. Due to the nature of the telecommunications business, the U.S had to provide Huawei with technical confidential information and U.S suspects that Huawei passed it on to China without keeping its promise. Huawei countered that it had not and will not break agreements in the future, but the U.S still has not stopped investigating.

There are many reasons why the American investigation has not stopped. First of all, there are concerns that Huawei and Chinese telecommunications businesses could threaten the position of the U.S telecom business as they are making inroads into emerging markets such as developing countries. Industry sources said that U.S is pressuring its Asian allies to prevent the use of Huawei equipment. They also said Papua New Guinea was under the greatest pressure at the moment, and India also appeared to be under pressure. BBC Asia Business correspondent Charismar Vaswani said that Huawei’s board is being victimized by a power struggle between the U.S and China.

Recently, the U.S imposed a third additional tariff. The additional tariffs are $250 billion so far. The tariff increase rate was between 10 percent and 25 percent, and was applied across various industries. China also imposed $110 billion worth of tariffs in response. Tariffs between 5 percent and 25 percent were levied mainly on chemicals, coal and medical devices. The International Monetary Fund said last month that intensifying retaliatory tariffs between the two countries could cut global economic growth by 0.5 percent by 2020. Korean benchmark KOSPI is falling and the industry is being affected by the U.S and China trade war.

The negative impact from the prolonged U.S and China trade conflict is very clear to the countries that rely heavily on trade, such as Korea. The U.S and China conflict will increase trade pressure on countries that maintain a large trade surplus with the U.S and China. What Korea needs to change and prepare is obvious. The government should actively pursue market diversification. Vietnam and India are the major beneficiaries of the U.S and China trade conflict. This is because they are Chinese replacement countries that serve as world factories. Korea needs to more actively manage risks from China through brisk investment and market improvements in these countries.

By Park-Junho, reporter

박준호  micheen12@naver.com

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