BY ANTONY MUTUNGA
It started with a slogan that many related to; America first, but that no one had anticipated would lead to war.
Global trade war has been showing its ugly head for some time now as the USA and China lock horns. Since 2018 the two countries have been involved in a battle of increasing trade tariffs that have no clear end in sight as part of Trump’s agenda even before he was elected to office.
During his presidential campaigns, one of his agendas was to reduce the trade deficit, which kept growing alarmingly especially with China. According to the US Census Bureau, in 2016, the trade deficit with China had grown to almost $350 billion (Sh35.7 trillion) from$315 billion (Sh32.2 trillion) in 2012. After winning the elections, President Trump was ready to launch his ‘America first’ economic policy. After a few years in office, he finally embarked on his agenda to reduce the trade deficit.
In the starting months of 2018, he placed a tariff on foreign solar panels except those from Canada. The tariff, which was placed at 30%, was to be reduced to 15% after four years. This resulted in China crying foul as they are the world leaders in the manufacture of solar panels. The U.S did not stop there as they placed another 20% tariff on the first 1.2 million units of imported washing machines. This affected China as in 2016, the East dragon of Asia had exported $425 million (Sh43.4 billion) worth of washing machines to the US.
March, same year, the U.S dealt another blow to China as Trump imposed a 25% tariff on steel imports excluding those from South Korea, Brazil, Argentina, and Australia. He further imposed another 10% tariff on aluminium except for Argentina and Australia. Majorly affected once more, China finally retaliated as they imposed a 25% tariff on about 128 U.S imports. The tariffs affected imports worth$3 billion (Sh305 billion). Some of the products affected included wine, pork, seamless steel pipes, and fruits.
The U.S did not take this lying down as they promised to impose a 25% tariff on many products from China worth $50 billion (Sh5.1 trillion). The reason, according to Trump, was due to unfair trade practices among them theft of intellectual property. Wasting no time, China, on the other hand, proposed a 25% tariff on 106 U.S products, such as soybeans, automobile, and chemicals, worth an equivalent $50 billion (Sh5.1trillion). A few days later, the U.S Department of Commerce banned U.S companies from doing business with ZTE Corporation, a Chinese multinational telecommunications company for seven years. This was after the department concluded that the Chinese company had violated U.S sanctions.
In retaliation, China slapped hefty anti-dumping deposits on imports of U.S. sorghum. The Asian country placed a 178.6% charge on the grain that is used in livestock feed and the spirits industry. This resulted in trade talks between the two countries. As a result of the trade talks, the ban on ZTE was called off and now the company could deal with U.S companies once again.
The trade war has nonetheless intensified as China and the U.S continue to engage in tariff wars. The two countries have continued to increase tariffs on each other’s products. Just this May, the U.S placed Huawei, a Chinese multinational technology company, and 70 of its affiliates on its entity list, which banned it from purchasing from U.S companies. The U.S had taken major shots at China with blacklisting Huawei. According to Ren Zhengfei, Huawei CEO, the company is expected to lose up to$30 (billion Sh3 trillion) in expected revenues for the year. Consequently, China announced it would be establishing its own entities list, which will include foreign enterprises, organizations, and individuals that violate contracts and do not follow market rules. Additionally, China increased its tariffs on U.S products worth $60 billion (Sh6.1 trillion).
Even though China has borne the brunt of U.S scrutiny, other countries have also seen U.S impose tariffs on them. Argentina and Indonesia had their imports, mainly biodiesel, a mojor grower of corn, and soybeans worth $1.5 billion (Sh152.8 billion) being tariffed. Trump had also threatened to slap a 5% duty on all Mexican imports in order for the country to look for ways to curb illegal immigration. The tariff was also to be increased to 25% in October depending on talks between the two. The threat resulted in Mexico reaching an agreement with the U.S decided to curb illegal immigration into America.
India has also been a victim of U.S tariffs on its imports. This, according to the US administration, is a way of correcting the unfair trading practices it has with some countries. India retaliated by announcing it will impose tariffs on 28 US products including U.S. almonds, nuts and increase tariffs on a range of other farm products as well as iron and steel. The European Union has also not been left behind by the U.S as it was highly affected by the steel and aluminium tariffs. The bloc slapped retaliatory tariffs on US goods worth $2.4 billion including bourbon whiskey, motorcycles, and orange juice.
The U.S seems to be on a path to protect itself and its people by imposing tariffs on most imports. Even though a change may occur within its borders, the it continues to alienate itself from other countries. This has the capacity to lead to a global trade war, but only time will tell if that comes to pass.