The apparent US-China trade war is not necessarily new but something that has been growing for some time.
We believe that this may get worse before it gets better and as many economists are suggesting could have a negative impact of up to .5% on our GDP. There are a couple of reasons behind this prediction, President Trumps complaints about China are largely correct and in order for China to respond they would need to make fundamental changes to their economic system.
The US trade deficit with China last year was $US375b, which is unsustainable by any measure.
The Australian Journalist Greg Sheridan sights five key reasons or complaints against China.
One: Beijing steals US intellectual property through cyber and other espionage means.
Two: Beijing often makes it a condition of US investment in China, and access to the vast Chinese market, that the US company involved fully transfers the intellectual property involved in the product. Once the IP transfer is complete, the American firm is often shown the door, to find it now faces internationally a lower-cost Chinese competitor that possesses all its industrial secrets.
Three: Beijing erects innumerable and unbeatable non-tariff barriers to prevent foreign competition in any Chinese market it wants to protect. These are almost impossible to police and even if they are dismantled they can be reimposed at a moment’s notice.
Four: Beijing often sells products at a loss to sustain domestic factories and secure foreign market share. This is the textbook definition of dumping.
Five: every Chinese company has at its core a committee of the Chinese Communist Party and is required to serve Beijing’s strategic interests.
These features are fundamental to the Chinese economy and so are not going to change anytime soon. This being the case any so-called trade war will have a long way to run.
The point is that we will, no doubt get caught in the cross hairs so we need to be alert but not alarmed and gear ourselves accordingly if we start to cop any fallout.