Explaining the US-China trade war which grabbed spotlight in 2018

File photo of US-China flag. Photograph:( Reuters )

WION Web Team Washington, DC, USA , Beijing Dec 18, 2018, 03.22 PM (IST)

The global economy suffered a jolt in 2018 as world's two biggest economies - US and China - got involved in a trade war. Both the countries accuse each other of putting unfair tariffs on goods produced in respective countries.

The first step was taken by US President Donald Trump who announced increased tariffs on more than 1,300 Chinese industrial and other products, nine per cent of its total imports from China last year. There was no need to convince Trump who has long criticised China's trade practices. It was, in fact, a recurrent theme in his 2016 election campaign.

In response to Trump administration tariffs on Chinese goods, Beijing imposed levies on $50 billion worth of American imports, 36.7 per cent of its total imports from US in 2017. Among them was a 25 per cent tariff on soybeans, the single most valuable US farm export. US growers sold $12 billion worth to China last year alone.

Trump further escalated the trade dispute, threatening to identify Chinese imports worth $100 billion for a tariff increase. Trump's negotiating style, honed in his years as a real estate developer, is to take extreme positions to force concessions from his opponents. So far that approach has had mixed results at home and abroad.

A temporary truce came when Trump met with his Chinese counterpart President Xi Jinping on the sidelines of the G-20 summit in Buenos Aires on December 1 and agreed to stop escalating tit-for-tat tariffs that have disrupted the flow of hundreds of billions of dollars of goods between the world's two biggest economies.

Trump and Xi agreed to launch new talks while the United States delayed a planned January 1 tariff increase until March 2.

Since then, Beijing has resumed buying US soybeans, cut tariffs on imports of cars from the United States, and told its state refiners to buy more US oil. China also issued guidance to local governments dropping references to its "Made in China 2025" high-tech industrial development goals amid reports it was looking to replace the program aimed at rivaling US dominance in industries such as aerospace, robotics, semiconductors, new energy vehicles and artificial intelligence.

Trump took those as signs that "China wants to make a big and very comprehensive deal".

While Beijing claims that Washington is the aggressor and is spurring global protectionism, China's trading partners have complained for years that it abuses World Trade Organisation (WTO) rules and propagates unfair policies at home that lock foreign firms out of some sectors as domestic champions are being nurtured.

It is China's huge trade surplus with the United States that has attracted most of the Trump administration's ire. China ran a record $375.2 billion trade surplus with the United States in 2017 as the overall US trade deficit surged 12 per cent to $566 billion.