US and China: A cold war brewing between two global giants?

Khushi Qazi
Tuesday, 26 May 2020

While there are the more conventional wars fought with arms and ammunition between countries, there are those that are less violent and physically/materially damaging for the involved parties.

If there had to be one thing that the history of ‘relations between countries’ over the centuries has shown us, it is the influence and impact that can be created by the ‘need for power’.

While there are the more conventional wars fought with arms and ammunition between countries, there are those that are less violent and physically/materially damaging for the involved parties. These are equally impactful for others or in some cases, can have an even worse effect in many unprecedented ways. Those are what we generally refer to as cold wars, and we have witnessed quite a few such wars that have left an everlasting impact.

But when two of the world’s most powerful countries are at war with each other that does not seem to end anytime soon; it can leave a significant impact on the rest of the world as well. We are currently in the midst of one such a war - a ‘trade war’ - between the United States (US) and China.

BEGINNING OF CONFLICT
The US-China trade war began in 2018, two years after US President Donald Trump came to power. The motto of Trump’s campaign during his first election was ‘America First’. Keeping that in mind, he increased tariffs on nearly 1,000 Chinese products like aeroplane parts, medical devices, etc., after he came to power to ensure that American consumers prefer things ‘Made in America’ which would also reduce American investments in China.

Reverting to the imposed tariffs, Chinese President Xi Jinping gave the US a taste of its own medicine by announcing tariffs on several American products.

Since 2018, with three rounds of tariffs that year and another one in 2019, the US imposed trade tariffs worth over US $350 billion of Chinese goods, while China retaliated with similar tariffs on more than $100 billion worth of American goods. These tariffs, back and forth, ranged between 5-25 per cent.

 

 

After months of negotiations, both the countries signed ‘Phase One’ of the trade deal in January 2020. While Donald Trump considered signing the pact as a major success of his administration given that his predecessors had not been able to come up with a so-called ‘win-win’ deal with China, many believed his main intention was to deflect the people and his critics from the impeachment process in the US that was underway at that time, rather than coming to an agreement with China.

Nevertheless, a deal was signed, and as part of it, both countries decided to relax tariff duties placed on each other as they were exchanging blows. China promised to boost imports of American goods by a mammoth US$200 billion and also promised to strengthen rules regarding intellectual property rights, something that Trump has time and again accused China of violating.

Honouring the deal on China’s part was considered to be a tough and challenging task when it was signed and while the Trump administration said that a ‘Phase Two’ of the deal would be worked upon soon, not many expected it to happen anytime soon due to the forthcoming US Presidential election to be held in November 2020.

Back in January and February, Trump in a series of tweets had said that the US and China are working amicably towards a consensus and that he and Chinese President Xi Jinping, whom he hailed as a strong and focused leader, were working closely together while also showering praise on China for its ‘transparency’.

HOW THE US-CHINA TRADE WAR ESCALATED

Month

US-imposed Tariffs

 

China-imposed Tariffs

 

August 2018

 

US$ 16 billion

 

US$ 16 billion

 

September 2018

 

US$ 200 billion at 10%

 

US$ 60 billion at 10%

 

May 2019

 

US$ 200 billion at 25%

 
NA

June 2019

 

NA

 

US$ 60 billion at 25%

The second half of 2019 saw both countries constantly threaten to impose new tariffs on each other while also raising existing ones. (Source: BBC)

 

 

COVID-19 PANDEMIC HITS HARD
After signing the deal, the reports of the spread of the novel coronavirus (COVID-19) started gripping the headlines as it spread like wildfire in China and across the world.

The COVID-19 pandemic has taken a toll on the economies around the world. Several nations are suffering financially, and experts have announced that it could be the start of the global recession.

Many theories have been floated around China’s involvement in spreading the virus either by mistake or as bioterrorism.

This also put a strain on the already tense relations between China and the US as the spread of the virus across the United States highlighted the incompetence of the Trump government just before the beginning of his election campaign. Trump has been continuously critical of China for not curbing the spread of the virus.

 

 

“The virus came from China. We are not happy about it. We just signed a trade deal. The ink wasn’t even dry and all of a sudden, this floated in. We are not going to take it lightly,” Trump said recently.

Pro-Trump groups have also linked China to Trump’s rival in the forthcoming elections from the Democratic Party - Joe Biden - saying ‘don’t blame us for the coronavirus, blame China.’

 

 

Trump’s anti-China stance has grown in these past months. He also said that the US would be imposing more trade tariffs on China in response to the coronavirus while deciding to hamper further Chinese tech giant Huawei’s ability to work in the country by restricting the firm’s ability to manufacture using software made in America.

HUAWEI HAS A HUGE CONSUMER BASE IN THE US
Many reports by leading media agencies in China suggested that the Asian giant will retaliate once again by sabotaging American firms’ ability to do business in China by imposing numerous restrictions on them. “Major US firms like big as Apple, Qualcomm, Cisco and Boeing could face restrictions,” a report by CNN said.

Chinese Foreign Minister Wang Yi has accused the US on Monday of spreading ‘conspiracy and lies’ about China’s involvement in spreading the coronavirus, according to a news report by the BBC.

“China has no intention to change, still less replace the United States. It’s time for the United States to give up its wishful thinking of changing China and stopping 1.4 billion people in their historic march toward modernisation,” Wang further said as per a report in The Guardian.

Chinese diplomats have also claimed that the US president has played the ‘villain card’ on China, so he does not get blamed for failing to control the spread of coronavirus in the US.

Hua Chunying from the Chinese Foreign Ministry said, “China is opposing the US and other countries’ moves for trying to politicise origin of coronavirus, and it has turned into a blame game now.”

 

 

Chinese diplomats have also come out and blamed the US, saying that it was the US that has created the virus during international military games.

The United States also recently slammed the Xi Jinping-led government for introducing the new security law bill for Hong Kong in its parliament.

HOW DOES INDIA FIT INTO THE PICTURE?
Experts have said that a lot of countries are looking away from China as an investment ground and it could prove to be a boon for India.  As tensions between China and the US are moving in the direction of a possible no-return, Trump and his administration could look to India as a potential avenue for conducting business and for investment. Taking advantage of the US-China, India has also asked a lot of American companies and other foreign investors to shift base from China, luring them with attractive deals in India.

On Monday, Union Minister of State for Finance Anurag Thakur told IANS in an exclusive interview, “We are working on a roadmap for attracting foreign investments to India which includes reducing imports of weapons and increasing manufacturing on a large scale. It will also provide employment opportunity to our citizens. This will make India a global power in the supply chain and also boost our exports.”

The US is now negotiating with India over a trade deal, which was also discussed when Trump visited India in February 2020 to meet Indian Prime Minister Narendra Modi. India could also attract investors from other countries like the European markets.

REPERCUSSIONS
While this cold war could be beneficial for India in terms of getting foreign investments, if not stopped, it could not only worsen relations and spell economic turmoil for these two world giants, but also destabilise economies around the world.

According to the International Monetary Fund (IMF), the world economy is expected to take a hit by three per cent in 2020, and the coronavirus is not helping in any case. The financial crisis could take years to recover from, and an impending cold war will only take a further toll.

Long before the coronavirus came into the picture, many experts had already predicted that a long-standing feud between the US and China could also spell doom for some of the technological advancements across the world.

Economist Charles Dumas told a news channel, “What we are looking at is a long-standing contest between two major countries for world economic primacy and politics. I am not sure if winning this contest can be won by either of them as they are two such big economies.”

“An armed conflict could arise between the two nations if they fail to resolve their trade war,” warned former US secretary of state Henry Kissinger.

The rivalry between the US and China has intensified in every sector like technology, military and economy. Many countries claim they are US’ allies, but cannot make a decision in haste and cannot blindly follow Trump and his ideologies.

However, they will soon have to decide whom they stand for and what they stand for as the two giant economies at the centre of this cold war are showing no signs of slowing down.

As much of the rest of the world is caught in between a trade war between two excessively powerful economies, while already dealing with a pandemic that has severely affected each nation in its way, the need for stopping a trade war from spreading into a cold war or even a bigger war and causing irreversible damage across the world must lead to action on a ‘common goal for world peace’.

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