China and the USA have started a tit-for-tat trade war – but what’s really behind the dispute?
The tussle began when US President Donald Trump hiked tariffs on the import of Chinese steel and aluminium.
The increase was hardly worth the bother as America buys little of either metal from China.
But the move sparked a response from Beijing on $3 billion worth of food imports from the US – roughly the same value as China’s steel and aluminium exports to the US.
Now, Beijing has upped the ante with a pre-emptive strike by slapping a threatened tariff on $50 billion more of US imports.
Trump says that the trade balance between the US and China is unfair as Beijing demands US companies hand over technology secrets if they want to do business in China.
Technology at stake
The US has already moaned to the World Trade Organisation about the Chinese policy on the grounds Beijing is limiting the control businesses have to control and profit from their technology.
At the root of the dispute is the ‘Made in China 2025’ policy from Beijing which aims to make the country the world leader in the design and manufacture of electric cars, robotics and other advanced technology fields.
Trump wants to keep the technology in the US to boost the economy and jobs.
At stake is the is the globe’s most valuable trading relationship.
The US has a huge $375 million trade deficit with Beijing and risks losing 2 million jobs supported by exports to China.
China risks losing a slice of that trade and equally has millions of jobs riding on contracts with the US.
Beijing wants a fundamental switch in the relationship. Instead of building factories to make American technology, the government wants to produce and make the technology in China.
Although most of the world’s phones, computers and consumer technology come from Chinese factories, the research and development – and the profits – are based in other countries.
Other countries are also disgruntled with their trade pacts with China – including the European Union and Japan.
Europe has complained for years about China dumping cheap steel on the market that is subsidised by Beijing to keep steel works open to save jobs.