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American and China Trade War

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  1. GDP

The U.S - China trade war is critical conflicts between the two biggest economic power nations in the world. By the year 2030, in projections, China's GDP will exceed America's. However, if we measured by purchasing power parity (PPP), China's GDP exceeds US now. The US and China is also two trade powers: The US is the biggest importer and the second of the world in exporting; China is the largest exporter and second in importing.

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2. The reasons behind the initiation of a US – China trade war?

  1. Underlying reason

The US wants to restrain China raising up in politics, economy and technology to protect US’s position.

The true goal of Donald Trump when the initiative comes ahead of the trade war with China is aimed at discouraging China continues to breach the intellectual property rights of the United States.

With the goal of becoming an advanced economy in the world, China is currently pouring billions of dollars into the program "Made in China in 2025 (2025 Made in China)" to create dynamic development of the key industries, including robotics, artificial intelligence, aerospace, electric cars, internet technology 5G. If this plan is successful, China will become the most competitors and gain the number one current of US businesses.

For the reason above, through trade wars with China, US can increase the pressure, and create more fairness in the deal between the two countries’ businesses in order to protect the invention and their position.

We all can predict that the current trade fight is only the most visible sign of a bigger fight in the race to win power and influence in the 21st century. The thing that we see is the conflict between the two countries in terms of geopolitics, between "America First" (the United States above all) and a side of "Made in China" (made in China).

  1. Specific reason

Here are the specific causes the stress of U.S - China trade leading to the current trade war.

  1. The policy of the Government of Trump.

Since taking the power, Donald Trump has pursued the policy of protectionism with the goal of "America first" and "made US’s the great return". The policy of protectionism does not only leads to a trade war with China, but also leads to conflict with the trade with allies of The United States (such as the EU, Japan, Korea) or neighbors of The United States (as Canada , Mexico).

The US and China as the two countries compete to each other about economic position. Therefore, the competition between China and US will not end when Mr. Trump left his office.

  1. The large of US trade deficit with China.

US's trade deficit is considered the direct cause of tension US - China trade. According to CNBC, the US imported $505 billion dollars of goods from China (including computers, kitchen appliances, cellphones and shoes), while only exporting $130 billion of goods to China (with airplanes and soybeans). US's trade deficit with China is up to $375 billion dollars.

Therefore, in an effort to achieve balanced trade with China, Trump has conducted to apply import tax on goods from China in order to pressure China to increase purchases of US’s goods, thereby reducing the trade deficit. This helps the strategy of bringing jobs back to US and encourage domestic production of Trump administration.

  1. The restrictions on investment in China.

US has a strong response to China because China did not give foreign companies the right to approach the domestic market in a relative way. The China Government has taken the commitment which is going to loosen restrictions on foreign owners in the areas of automotive, shipbuilding and aircraft as soon as possible; at the same time promise to promote the measures announced aimed at opening the country's financial sector. Thanks to that, China companies have an advantage of tens of years to create a dominant position in the domestic market, and to have the ability to invest abroad.



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