The escalating trade spat between the two largest economies in the world, the United States of America and China, respectively, is emerging as a serious threat to the global economy.
After trade negotiations between the two countries for almost a year, Trump pulled out in May and increased tariffs on US$250 billion worth of Chinese imports. Beijing retaliated by announcing higher tariffs on US$110 billion worth of U.S. imports starting June.
Latest statistics from China also show that direct investment by Chinese companies in the US was down by 10 per cent year on year. In 2018, US direct investment in China was up by only 1.5 per cent, compared with an increase of 11 per cent in 2017.
The situation is getting dire, recently compelling G20 finance ministers and central bank governors to discuss the intensifying global trade and political tensions caused by the worsening trade war. In a joint communique on Sunday in Fukuoka, Japan the central bankers said they will continue to address risks and prepare for further action.
China must have seen it coming, after claims by the U.S. for over a decade that tech giant Huawei was engaged in unfair trade practices and surveillance. With no evidence of these accusations, however, it can only be concluded that finally placing Huawei on the so called ‘entity list’ aims at sabotaging China’s 5G network pioneering role.
Whatever was hidden between America and China’s trade rivalry is just coming to the fore. On 6th June, China’s President Xi Jinping and his Russian counterpart Vladimir Putin, met in Moscow during celebrations marking the 70th anniversary of diplomatic relations between the two countries.
It is a case of ‘I have your back’ between the two leaders. Both countries desperately need each other to fortify their economies from what can be seen as Trump’s bullying and arm twisting tactics.
During the trip, the two nations signed several trade agreements and energy deals. Xi and Putin witnessed the signing of an agreement to develop a 5G network in Russia, thus taking some heat off America’s foul play.
Trump looks determined to forestall China’s global ambitions by going for her allies as well. For example, the U.S. Senate is set to discuss sanctions under a under a new bipartisan bill that seeks to punish European ships involved in the construction of a controversial gas pipeline from Russia to Germany. This could be a way of sabotaging the ambitious Belt and Road Initiative that aims at building interconnected trade routes around the world.
Beijing is not taking Trump’s belligerence lying down either. On 5th June, China’s Ministry of Culture and Tourism warned its citizens to “fully assess the risks” of travelling to the US in light of the recent mass shootings in Hawaii. It is estimated that over 10,000 people fly between China and the US on a daily basis, which is about 4 million people a year.
On 2nd June, China published a white paper, China’s Position on the China-US Economic and Trade Consultations’, laying out its official position. Basically, the paper laments America’s unilateral and protectionist policies, criticizes its backtracking on Sino-US trade talks, and demonstrates China’s stance on trade consultations and the pursuit of reasonable solutions.
The ongoing conflict has also moved in tandem with the temperament of the two leaders. Trump’s brashness is a stark contrast to Xi’s conciliatory tone. In his recent remarks in St Petersburg, Xi asserted he intends to be ‘a constructor, not a destroyer’, of global trade.
Going forward, scholars are studying how this conflict will affect the African continent. So far, African governments seem to have taken a wait-and-see attitude. But in a globalised world, the effects will be felt in coming months, if the situation is not ameliorated.
According to statistics from China’s General Administration of Customs, the country’s trade with Africa was the highest in the world in 2018. The import growth rate was also the highest in the world. China’s exports to Africa were US$104.91 billion, up 10.8 per cent, and China’s imports from Africa were US$99.28 billion, up 30.8 per cent.
If the spat continues, investment inflows from China are bound to decrease, owing to the fact that revenues from the U.S. will reduce due to the effects of the increased tariffs and product ban. China might also aggressively sell her products to Africa to cover some of the revenue shortfalls.
It is time for Africa to strategise her place in the changing geopolitical map, and decide where her bread will be more buttered. The best bet will be to stay with the empathetic partner, and learn how to overcome the odds.
The writer is a communication specialist, writer and analyst on China-Africa affairs. [email protected]