Trade war between the U.S. and China with no end in sight

July 28, 2024

The technology and trade war between the U.S. and China has yet to reach a conclusion. This situation depends on the world’s confidence in the strength of the U.S. economy, which continues to lose weight in the world economy.

trade war between US and China, flags, Más Colombia

During Donald Trump’s term in office (2017 – 2021) the United States unleashed a trade war against China by imposing high tariffs on a good portion of products coming from that country.

You may read: FTA with the European Union: more exporters, but stagnant trade and little diversification

The trade war has not substantially changed the situation

Despite these trade protection measures, according to U.S. government statistics in 2022 this deficit reached USD 537 billion, although during 2022 and 2023 imports of Chinese products fell by 20%.

The measures taken by the United States to face this trade war have not had a substantial impact on the reduction of its trade deficit, which in 2023 was USD 1,152,972 million, equivalent to 4.21% of its GDP, a fairly significant amount, although lower than that recorded in 2022, which was USD 1,306,594.5 million, or 5.14% of GDP.

The deficit is financed by the United States by increasing its debt, which so far, according to the US Treasury Department, amounts to USD 34.5 trillion.

The United States is indebted by issuing various types of paper, including treasury bonds, and to achieve this indebtedness it has to pay high interest rates, which pushes up interest rates worldwide and the other countries have to maintain equal or higher rates so as not to precipitate a flight of capital towards U.S. bonds.

This trade war is unsustainable in the medium and long term because it depends on the world’s confidence in the strength of the U.S. economy, which has tended to lose weight in the world economy.

You may also read: VaxThera, the vaccine “Made in Colombia” is a reality and marks a milestone in sanitary sovereignty

The trade war is also technological

The situation of the United States is particularly complex in relation to China, as it is not only a trade war, but also a technological dispute, since trade with the Asian giant is not limited to manufactures and raw materials with little added value, but has been concentrating on products with high technological development.

The main Chinese exports in 2024 were telephones (7.7%), automatic data processing machines (5.2%), electronic integrated circuits (4.3%), semiconductors (1.8%) and electronic accumulators (1.6%).

Vehicle exports play an important role in Chinese trade, reaching almost 5 million units in 2023, with the main destinations being Belgium, the United Kingdom, Saudi Arabia, Australia and the United States.

Chinese automobile exports increased by 63.7% in 2023, with hybrid and electric vehicles occupying a prominent place in this expansion.

Colombia exports, port, containers, exports, exports, ship, cargo, cranes, Más Colombia

The growth in Chinese automotive exports was driven by exports of new energy vehicles (NEVs), which soared 77.6 percent to over 1.2 million units in 2024 and within these, exports of pure electric vehicles increased by 80.9 percent, while those of hybrids rose 47.8 percent year-on-year.

According to Chinese sources, total annual vehicle production is around 30 million vehicles per year, of which around 22 million are destined for the domestic market.

NEV production and sales exceeded 9.49 million units, representing year-on-year increases of 35.8 and 37.9 %, respectively. The market share of NEVs stood at 31.6 %.

Chinese automobile exports, whose price and quality compete with those of the United States and Europe, have put Western companies at risk in a sector that not only generates a large number of jobs, but also important technological linkages.

This explains why, mainly since May, the United States has increased tariffs on Chinese electric vehicles by up to 100%. One more symptom of this trade war.

President Joe Biden kept for the last three years most of the tariffs Trump put on China, but increased them for some goods such as electric vehicles, semiconductors and steel, but also aluminum, batteries, solar cells, cranes and some medical products produced in China, such as syringes and needles.

In 2018, Trump imposed tariffs of up to 25% on foreign-made washing machines, solar panels, steel and aluminum, as well as many Chinese-made products, including baseball caps, luggage, bicycles, televisions and sneakers.

Exports, Latin America and the Caribbean, Más Colombia

Biden and Trump agree on protectionist policies towards China

In the midst of this trade war, Trump plans to increase tariffs by enacting a tariff of at least 10% on all imports from all countries, a tariff of over 60% on all Chinese imports and a 100% tariff on all automobiles manufactured outside the United States.

China is not a major exporter of electric vehicles to the United States so the U.S. government has called the new measures preemptive tariffs, these tariffs will be implemented gradually and signify an escalation in the trade war unleashed by Trump.

China for its part is threatening to stop exports of critical minerals for the energy transition and decrease the export of technologies for the “green economy”.