US – China Trade War: Is It On Or Not?

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    The two biggest economies in the world continue to negotiate with each other about trade. As these talks ebb and flow, concerns over a full-blown trade war rise and fall along with the prospects for a mutually beneficial outcome. Conventional wisdom holds that a major trade war would make goods more expensive in both countries, as well as globally. Additionally a real-live trade war would put a big damper on international economic activity as well as raise the specter of inflation because of rising costs. On the other hand, many argue that trade imbalance is already putting some nations, including the United States, at a disadvantage and that these economic distortions need to be rectified.

    The Latest On the Sino-US Trade Talks

    On June 3, China warned that the imposition of tariffs on imported Chinese products to the United States “Threatens to wipe out progress made in trade talks between Beijing and Washington”, according to a summary article on the topic by Jethro Mullen appearing in CNN Money.

    Additional remarks made by the Chinese side include:

    • New Agreements: According to Chinese ministers, “Agreements between China and the United States should be based on the premise of both sides moving in the same direction and not waging a trade war.”
    • If Sanctions Are Placed: The Chinese side also countered with a warning that if the US puts trade sanctions into place then “All the economic and trade benefits negotiated by both sides are not going to take effect.”

    Current Chinese-American Trade Imbalance

    Sino-US trade has been in a state of imbalance for years, and continues to the present day. The US exports $187 Billion of good and services to China. On the other side of the ledger, the US takes in $524 Billion of Chinese imports. It is this imbalance that has fueled the recent trade talks since the Trump administration can into power.

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