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China-US trade war

May 20,2019 - Last updated at May 20,2019

Last year’s trade value between China and the US was about $710 billion. Of that, China exported $530 billion and imported $180 billion. In other words, the US suffers a deficit of $350 billion with China. That is much better than what it had been. In earlier years, the deficit hovered around $500 billion. The two countries trade with each other only constitutes 5-5.5 per cent of total world trade in commodities.

The combined GDP of the two strongest economies in the world is $34 trillion, of which the US’ GDP is $20.5 trillion and the Chinese $13.4 trillion in the year 2018. Both countries’ combined GDP constitutes 40 per cent of the world’s total. If we add the European Union’s GDP of $18 trillion, the three would constitute about 62 per cent of the world’s total, with their populations adding up to 2.3 billion, or 30.4 per cent of the total world population.

These are bird’s-eye numbers which reflect the enormity of the two trade-combating economies. The disruption this trade war has caused thus far casts a shadow over the future of the world economy, unless this war culminates into a sensible deal.

The issue between these countries is not the trade deficit, which in itself can be reduced to small amounts. If we subtract the goods exported from China to the US but produced by US-owned companies, then the trade deficit would probably shrink to $200-$250 billion.

Moreover, if we calculate the US’ reexport of goods originally imported from China, then probably the trade deficit would go down to $100-$150 billion.

The recent ban by the US on Huawei phones and networks in fear of espionage is but an example of America’s retaliation.

Having said that, China is now much more self-dependent in technological mastery. It is too late for the Americans to reverse the tide. So, both parties need to come to their senses and put an end to this contest. 

There is a whole world out there waiting for the elephants to call it quits and leave the kitchen.

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