The ongoing tradewar between US and China is reaching alarming proportions and has to be seen as a war for international supremacy in Technology and Power

1. The US-China Trade war
Dr.Ram Mohan.K.P

2. • For many years China has
been taking advantage of the
United States on Trade,
Intellectual Property Theft,
and much more.
• Our Country has been losing
HUNDREDS OF BILLIONS OF
DOLLARS a year to China,
with no end in sight. China
has been raping the US
companies and consumers for
several years.I am destined to
stop this………

3. United States and are China world's largest economies
ranked First and Second, in terms of GDP

4. China is the world’s largest exporter and the
United States is the world’s largest importer.

5. The Background
US
Congress granted
China most
favored
nation status
(MFN) in 1980
President Bill
Clinton in 2000
pushed Congress
to approve the
U.S.-China trade
agreement and
China’s accession
to the WTO.
China lowered its
average import tariffs to
10% by 2005 from the
40% it maintained in the
1990s.
While the U.S. trade
deficit with China
was $90.2 billion in
2001, it nearly
doubled by 2005

7. Main US Trade deficits

12. 01 December, 2018- G20 summit in
Argentina
• Xi Jinping and Donald Trump agree a ceasefire to the
trade war suspending a tariff increase of 10 per cent
to 25 percent on US$200 billion of Chinese goods that
was due to come into force on January 1
• China suspends tariffs on US-made cars and auto parts
for three months from January 1, and also resumes its
purchase of US soybeans

16. What is Free Trade?
A free trade is
defined as a policy
of unrestricted
foreign trade with
no tariffs or
subsidies on
imports or exports
or no quotas or
other trade
restrictions
International trade
is considered the
"Engine of
growth“;
It proved to have
advantages to the
global economy.
The most famous
form of trade
barriers is
maintaining
protectionism
through imposing
import tariffs

17. Advantages of free Trade
Enhances competitiveness and innovation by technology transfer
across countries which eventually increases economic growth.
It stimulates job opportunities, promote higher wages, higher
standards of living.
Enables consumers to buy better quality products at lower costs
Open economies were proved to grow three
times more than the closed economies.

18. What is a Trade War?
Whenever a
nation make an
attempt to
protect its
domestic
industry by
putting an extra
tariff or quota
on imported
goods,--
a trade war
begins
If one
country
increases
tariffs and
the other
country
retaliates
the trade
war
escalates
wherever
tariffs are
imposed it
increased the
consumer
prices and
worked as a --
-
deterrent to
economic
growth

19. • A tariffs is a tax levied on
imports. Tariffs may be
levied in two basic ways:
• Specific Tariffs: Are
levied as a fixed charge
for each unit of a good
imported.
• Ad valorem Tariffs: Are
levied as a proportion of
the value of the imported
goods

20. Other instruments of Protectionism
Subsidies
• It is a government
payment to a
domestic producer.
in many forms
including cash
grants, low-interest,
tax breaks and
government equity
participation
Import quotas
and voluntary
export restraints
• It is a direct
restriction on the
quantity of some
good that may be
imported into a
country
Antidumping
policies
• It is defined as
selling goods in a
foreign market
below production
costs or below fair
market value

21. W T O
International trade has its apex body in
the form of WTO (World Trade
Organisation.)
Established on Jan-1,1995,WTO has now 164 Members
and mainly it settles the trade disputes among member
nations
Body for Consultations of member countries, Dispute settlement
mechanism and a catalyst for world trade .
In last two decades of its working it tried to reduce trade barriers all
over the world.

22. Other Guardian angels
International Monetary Fund
• It is mainly working for the global monetary
cooperation among the Nations of the world
and to settle any imbalance in balance of
payments.
• World Bank
• World Economic Forum
• Instruments of Policy: a collection of rules and
regulation which pertain to trade.

23. Deadweight loss and Harberger’s Triangle
In line with the law of supply and demand, as the price paid by consumers increases,
and the price received by sellers decreases, the quantity that each wishes to trade will
decrease

24. Implications of Trade War on Global
Trade
• Tariffs are supposed to give a competitive
advantage to domestic producers and would offer
more jobs.
• In the long run, economic growth is depressed
for all the countries involved. It also triggers
inflation when tariffs increase the prices of
imports.
• In general, trade tariffs are
detrimental to economic growth.

25. Implications
• In spite of expectations, these tariffs may not
bring manufacturing jobs back.
• Any jobs created in industries protected by
tariffs would be offset by those lost in
industries that make use of these products
and which would face rising costs, and due to
export sectors being hit by retaliatory tariffs.

26. History of trade wars
Opium war
between
China and
Britain
from 1839
to 1860
the Anglo-
Irish war
after 1932,
the
Banana
wars in
1993.

27. Opium wars

28. The first Opium War (1839–42)
• the Chinese government(Quing dynasty)
confiscated and destroyed more than 20,000
chests of opium that were warehoused at Canton
by British merchants.
• British warships destroyed a Chinese blockade of
the Pearl river (Zhu Jiang) estuary at Hong Kong
• Treaty of Nanjing, signed on August 29. By its
provisions, China was required to pay Britain a
large indemnity, cede Hong Kong Island to the
British

29. The Second Opium War
In the mid-1850s
• In early October 1856 some Chinese officials boarded
the British-registere ship Arrow , and allegedly lowered
the British flag. Trading ceased as a stalemate ensued.
• The French decided to join the British military
expedition,
• The treaties of Tianjin, signed in June 1858,
• provided residence in Beijing for foreign envoys,
• the opening of several new ports to Western trade
and residence,
• the right of foreign travel in the interior of China, and
• freedom of movement for Christian missionaries.
• the importation of opium was legalized

31. Banana
• Since 1975, each Caribbean country has a quota
of bananas, enabling them to sell to Europe as
many as they wanted to support. To enable the
economies of such developing countries.
• To protect banana farmers in the Caribbean from
competition from Latin America, whose bananas
are cheaper because they are grown on large-
scale, mechanised plantations run by giant US-
based corporations.

32. Banana wars
• The US complained in WTO that an EU scheme giving
banana producers from former colonies in the
Caribbean special access to European markets broke
free trade rules.
• Only seven per cent of Europe's bananas come from
the Caribbean, US multinationals which control the
Latin American banana crop hold three-quarters of the
EU market and the US itself does not export bananas to
Europe.
• Despite this, the US filed a complaint against the EU
with the World Trade Organisation (WTO) and, in
1997, won. The EU was instructed to alter its rules.

33. Theft of intellectual
property
In the trade war that Donald Trump has launched
against China, alleged theft of intellectual property
(IP) is at the core of the dispute, Beijing’s supposed
theft of US trade secrets and forced technology
transfer policies

34. ALLEGATIONS by Trump
Counterfeiting
famous brands
Stealing trade
secrets to
pressuring
companies to
share
technology with
local companies
China supports
and conducts
cyber attacks on
U.S. companies
to access trade
secrets

36. What is intellectual property?
• It refers to creations of the mind, such as inventions,
literary and artistic works, and designs, symbols, names
and images used in commerce, according to the World
Intellectual Property Organization
• IP is protected in law by patents, copyright and
trademarks
• “The IP system aims to foster an environment
in which creativity and innovation can flourish

37. How do Non-Chinese companies lose
money?
• Missing out on possible sales to counterfeited goods.
• Lower their prices to compete.
• Spend billions of dollars to address possible
infringements,
• Trademark infringement was the most common form
of IP violation in China, while copyright infringement
was the most damaging.
• A 2015 paper by the Federal Reserve Bank of
Minneapolis concluded that more than half of
all technology owned by Chinese firms was
obtained from foreign companies.

38. China’s Justification
• In 2017, China paid $8.7 billion to US
companies for the use of IP.
• That is more than a 10-fold increase from
what Chinese companies paid in 2001, before
China joined the WTO..
• The claim is that China’s record on this front,
being nowhere nearly as bad as the Trump
administration and its supporters portray it.

39. China clarifies
• To gain access to China’s vast internal market,
Beijing sometimes requires foreign companies
to divulge their IP secrets to the Chinese.
• Companies that choose to do so expect that
the value to them of operating in China will
prove to be worth more than the value of the
IP that they are thereby required to divulge
• The IP divulged in response to this tax is no
more stolen property.

40. Apple sale in china

41. Apple story
• In2018,Apple sale in china was $51.9 billion which is 20
percent of Apple’s total revenues
• A great deal of assembly of iPhones and other Apple
products - products for sale both within and outside of
China –takes place in China
• this company’s presence in China is most certainly
valuable to the Chinese - as consumers, as workers,
and as government officials.
• To trust the U.S. government to impose tariffs at
home as it acts as an enforcer for private companies
that choose to operate abroad is a recipe for cronyism
costumed as ethical law enforcement.

42. Do Allegations of Intellectual-Property Theft
Justify Protective Tariffs?
• World Trade Organization’s procedure for settling
intellectual-property disputes is mostly ignored
by the Trump administration
• If the administration’s main concern were really
to reduce such thievery, it would first bring these
disputes to the WTO, rather than indiscriminate
imposition of punitive taxes on Americans’
purchases of Chinese-assembled goods.
• American consumers, after all, are not the IP
thieves.

43. The controversial company
Huawei founder Ren Zhengfei

44. Why is Huawei the focus?
• Huawei has overtaken Apple
as the world’s second-largest
smartphone provider and the
top supplier of telecom
equipment in Europe, Asia
and Africa.
• More importantly, it is the
leader of future technologies
like 5G and that’s the
underpinning for America’s
current trade war with China.

45. Huwawei Growth

46. The 5-G Leap
• The next-generation 5G network will offer a quantum
leap in data speeds in the making of a global digital
nervous system
• --enable radical advances in artificial intelligence,
• --- in factory robotics,
• ----machine learning networks,
• ---- clean energy technologies
• -----advanced medical equipment.
• In short, it will change life as we know it now.

48. • .

49. • Revenue from 5G infrastructure could reach $4.2bn
worldwide in 2020, an increase of 89% from the 2019
revenue of $2.2bn.
• The pioneer to introduce and control 5G Technology
stand to gain approximately $500 Billion in coming
years and create one million new jobs
• Huawei has over 56,000 patents on critical telecom
technology. It is vigorously pursuing licensing deals and
stepping up royalty collection as the US restricts its
markets.

50. Unfortunately, the US is way behind in
the 5G race.
• That’s why Trump is doing his best to block
Huawei’s growth.
• He has barred US firms from using equipment
made by entities considered a national
security risk–primarily Huawei
• Also effectively canvassing its allies in Europe
to stop doing business with the Chinese giant
although it has never been able to validate its
allegations.

51. • CFO of Huawei
Meng Wanzhou was
arrested in Vancouver,
Canada, on allegations of
violating trade sanctions
against Iran.
• In May, the Trump
administration signed an
executive order that
banned all US companies
from using Huawei
equipment.

53. Implications of US-CHINA Tradewar

54. Implications of Tradewar
Trump hoped China will
revise its policies, stop
manipulating its
currency and will adopt
new policies that will
provide a better
business environment
to US exports and
investment in China
He hoped also to
protect the national
industries from
unfair foreign
competition by
imposition of tariffs.

55. Economic Consequences:

56. Economic Consequences:
• American consumers who are highly dependent on
Chinese imported goods suffer by paying higher prices.
• US producers who depend on Chinese imports of raw
materials have been suffering by increasing costs of
production.
• Eventually,
……the profits of US firms decrease due to
increasing costs
…..profits of Chinese firms decrease because of
reduced exports

58. Global consequences
Disrupts the
global distribution
and supply
channels, which
are the main
important
catalysts for trade.
trade diversion
• Diverts trade from
country that has
higher comparative
advantage to
another country that
has lower
comparative
advantage
IMF warned that
Trump's trade
war could cost
the global
economy $430
billion, equivalent
to 0.5% reduction
in global
economic growth

59. Political Consequences:
Politicians support
populist and
nationalist policies to
defend the national
production by
imposing tariffs to
restrict imports and
foreign competition
Return of
protectionism and rise
of populist, nationalist
and anti-globalization
waves

62. U.S. soybean growers
are targeting new
markets as demand
from China has
plunged dramatically
due to the escalating
Washington-Beijing
trade war.

65. Developing countries
“When elephants fight, it is the grass that suffers”
• Developing countries will be among the hardest
hit as, tariffs applied to their exports would rise
steeply.
• A trade war would be a severe blow to the
world’s poorest countries, as it would
compromise the fragile global economic
recovery, thus undermining growth and
development around the globe.

67. During the same seven months of
2019, imports to the US has increased-
• from Vietnam by 33.3 per cent,
• from Taiwan by 20.3 per cent.
• from South Korea by 9.8 per cent,
• from Mexico rose by 6.3 per cent,
• And from Japan by 4.6 per cent.
• The total increase in US imports from these five
economies alone is about US$35 billion, almost
identical to the import reduction from China over
this period

68. US imports from all countries-2019
overall US trade deficit rising
from US$494.5 billion to US$506
billion.
The trade war has made the US
trade deficit bigger, not smaller.
The real goal behind the
trade war was not to
reduce the overall US
deficit, but to force
relocation of production
from China to other
countries and to weaken
the Chinese economy

71. The GDP beneficiaries of Trade war

73. The beneficiaries of US-China trade
war
• Vietnam, Taiwan and South Korea have gained from
US import substitution in electric apparatus for phones,
parts for office and automatic data processing
machines;
• Malaysia in semiconductors; and
• Korea and Mexico in motor vehicle parts.
•
China’s import substitution has led to beneficiaries in
copper (Chile), soybeans (Argentina, Brazil, Chile and
Canada); gold (Singapore, Hong Kong and South
Africa); natural gas (Malaysia, Australia); and aircraft
(France and Germany).

74. Vietnam GDP grows on trade war gains
• The economy of the southeast Asian nation
was boosted by almost 8 percent.
• Vietnam’s gains came, because multinationals
could swiftly relocate to factories outside
China.
• Some Chinese companies are adopting crafty
ways to evade higher tariffs by removing
“Made in China” label by shifting production to
countries such as Vietnam.

75. Where does India stand?

76. India’s position
• On March 4,2018 President Donald Trump announced
that the US intends to terminate India as a beneficiary
developing country under the GSP programme (General
System of Preferences)
• GSP by eliminating duties of products when imported
from one of 120 designated beneficiary countries,result
in an increased and diversified trade with the US
• India decided to retaliate by imposing duties on about
29 goods of US origin worth $200 million

77. • India’s direct exposure to the US and China is
modest compared to its regional peers. China
(5%) and US (16%), totally account for a fifth
of total merchandise exports

78. Analysis by the Commerce Ministry
• Identified 503 tariff (product) lines where US imports
from China and India's exports to the world are
significant.
• Shortlisted 203 tariff lines where India has the ability to
replace Chinese exports to US
• The value of US imports from China (of these 203
products) is $15.5 billion, while India exports $2.4
billion worth of the same set of goods to US at the
moment
• Includes industrial valves, vulcanised rubber, carbon
or graphite electrodes, sacks and bags of polymers of
ethylene and natural honey.

81. Foreign direct investment relocated to
India
• Foreign firms operating in China are looking
at alternate production bases in the region.
• The fact that 43 per cent of China's exports
are carried out by China-based non-Chinese
firms
• It is good timer to seek FDI opportunities from
such firms to India and then allow them to
champion India's exports.

82. • Apple which has already been manufacturing iPhone
components and older models in India expects to
start building the newer iPhone XS and SR in India
this year.
• The Samsung factory in Noida is one of its biggest in
the world and 30 per cent of what it makes is
exported.
• Out of 56 companies that relocated their production
out of China between April 2018 and August 2019,
only three went to India; 26 relocated to Vietnam, 11
went to Taiwan and eight to Thailand.
• The recent cut in corporate tax may work as a boon
FDIs

83. Trade war could become currency war
Yuan falls to 11-
year low on trade
war,
The yuan fell to
7.1500 per dollar,
the lowest since
February 2008.

84. US designates China a ‘currency
manipulator’ as trade war rages
The yuan is not
freely convertible
and the
government limits
its movement
against the US
dollar
China clearly
believes that it
can boost
domestic demand
to compensate for
reduced exports
to the United
States
Devaluation makes
exports cheaper and
more competitive
against foreign
manufacturers.
Allowing the national
currency to weaken
will soften the blow
of tariffs on the
economy

85. China hold US Treasury notes, bills and bonds to
the tune of 1.13 Trillion US $, the largest by any
foreign country

86. China is unlikely
to use its $1trn
plus of US
Treasuries as a
trade war
weapon, because
it would
be financially
destructive to
both sides.
what's also
holding China
back is the
simple fact that
there is no
market as deep,
liquid and safe as
that of US
Treasuries

88. US-China trade war is battle for
Tech hegemony in disguise

90. More than the US‐China
trade deficit, the US is
more concerned with the
Made in China 2025
programme, which is
perceived to challenge
the primacy of the US in
the high technology
domain
Trump’s tariffs have
been designed to impact
the MIC 2025
programme

92. China’s programs
• Govt.Pressurise private companies to adjust to
their vision to China’s 2025 vision
• Provided subsidies -$300 billion investment
• Foreign investment and acquisitions
• Mobilising state backed companies
• Govt encouraging companies into
semiconductor firms to gain access to
technology
• Forced technology transfer agreements

94. Made in China 2025 and Why Has it
Made the World So Nervous?
• Made in China 2025 seeks to engineer a shift for China
from being a low-end manufacturer to becoming a
high-end producer of goods.
• Transitioning the country’s existing manufacturing
infrastructure and labor market towards producing
more specialized output – with targeted investments
in research and development (R&D) and an emphasis
on technological innovation.
• MIC 2025 sought to raise the domestic content of core
components and materials to 40 percent by 2020 and
70 percent by 2025.

95. The real reasons of Trade
war (Another angle)
Technology
supremacy
Dollar
supremacy
Discrediting
WTO

96. Another angle
• The trade war is nothing but an eye wash
• Nobody is scared of trade or current account
deficit.
• The trade war is basically a technology war
between US and China where both nations
want to have edge over each other.
---- From Artificial Intelligence to Network
Equipments, from semi conductors to cloud
computing.

97. Chip Technology-The king
• In this digital age chip is the plinth of Digital Economy and
National Security.
• The USA is having South Korea and Taiwan as its allies and
hence has hegemony on this very important industry.
• On the other side China is still struggling for having a
strong foot in this industry and spending more money on
the import of chips.
• In top 15 companies of Semi conductor there is not a single
Chinese manufacturer.
• Trump clearly understands the fact that not 10% or 25%
tariff but it is the supremacy in technology which gives
power to the US over Chinese..

99. Dollar supremacy
• The dollar has become the reserve currency because
over 70 per cent of world trade happens in dollars.
• This may look strange as the US share in world trade is
less than 15 per cent.
• The US manages this by ensuring that large trade
contracts for commodities like crude oil are always
denominated in dollars.
• Also, large US banks operating globally ensure that
most export contracts are made in dollars even though
it is not the currency of the buyer or seller.

100. Discrediting WTO
• Trump is using tariffs as primary tools for trade
war because raising tariffs requires no
investments and they do the most damage in a
world where trade accounts for more than a
quarter of world GDP.
• He needs to raise tariffs, but doing so violates the
WTO rules because the US has in 1995 tied its
hands by agreeing to maintain very low tariffs
(less than 3 per cent).
• So the solution is clear. Raise the tariffs, but
discredit the WTO as being unfair to the US.

101. Who's Winning the Trade War?
• The Chinese economy may be taking more hits
from an economic perspective, but from a
political perspective, the country’s
authoritarian government could stick around
longer than Trump and his policies will.
• It appears both China and the U.S. are taking
heavier losses than wins.

102. China’s Trade war chief Trump’s anti-China trade war expert
Vice Premier Liu He Peter Navarro

103. Trump’s top trade negotiator, Peter
Navarro, called China’s “seven deadly sins”:
• Currency manipulation,
• Cyberattacks,
• Selling fentanyl to the U.S.,
• Intellectual property theft,
• Forced technology transfer,
• Product-dumping
• Subsidized state-owned enterprises.

104. Trump appears to be 1st round winner
• Trump’s tariffs are
looking like an end-
goal rather than a tool
and more tangible
than any of the deals
the president has
promised.
• The real deal is
standing up to
foreigners who have
been eating our lunch,
from his perspective.

105. When will the Trade war end?
• The next high level talks are scheduled for this
month-OCTOBER-2019.
• Trump has two main hurdles in the immediate
future— The impeachment motion,
----The 2020 Elections.
• He may make a deal and declares victory
without gaining anything significant

106. When will the Trade war end?
• Donald Trump’s main goal at this point is to get
re-elected. And the bulk of his big donors —
including the biggest contributors to the
Republican Party — don’t want this fight to drag
on.
• He could get blamed for various negative
economic outcomes that may occur before the
presidential election.
• if there is a recession or serious slowdown before
the election, Trump’s trade war with China will
likely increase the blame that he gets.

107. • The trade war is a “lose-lose” situation.
• “The feud not only has precipitated an
• economic decoupling of the US and China, and has
pushed the overall bilateral relationship to its lowest point
in half century”
• “Cease-fires will definitely be temporary”, You may get a
shift in rhetoric, or tactics might change, but decoupling
is already underway.

108. US–China trade imbalance which is
fundamentally caused by structural
domestic factors:
Excessive savings over
investment and spending on
part of the surplus
country(China) and excessive
investment and spending on
part the deficit country.(US)
Fighting over the trade
imbalance through tit-for-tat
tariff and non-tariff measures
is simply inconsistent with
the economic interests of
both the United States and
China.

109. Who can afford to last the longest?
• Whoever has more stabilty
• Whoever has more resources
• Whoever is least dependant on other
• Supremacy for Power and Domination is the key
to this tradewar and technology supremacy will
bring power
• It is all about leverage and whoever
has more leverage will outlast and win.

110. Thank you