1 Trade war breaks out between the United States (US) and China 100 services 50 US$ billion primary income 0 -50 secondary income -100 -150 - -200 - goods -250 4 02 03 0401 02 03 01 01 02 03 04 01 02 03 04 01 02 03 0401 02 03 0401 02 03 04 01 0203 04 01 02 03 04 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fig 1.1: Components of the US current account, Q1 2010 to Q1 2018 6.90 6.80 yuan per 6.70 US dollar 6.60 6.50 6.40 6.30 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 2017 2018 Fig. 1.2: Chinese yuan to US dollar rate of exchange, August 2017 to July 2018 Extract 1: The US government says, "We are confronting China's unfair trade policies' For many years, China has pursued industrial policies and unfair trade practices - including dumping, discriminatory non-tariff barriers and industrial subsidies - that favour Chinese firms and make it impossible for many US firms to compete. China imposes much higher tariffs on US exports than the US imposes on China. China's average tariff rate is nearly three times higher than the average US rate. Certain products are even more imbalanced, for instance the US charges a 2.5% tariff on Chinese cars, while China currently maintains a 25% tariff on cars from the US. China has banned imports of some US agricultural products, excluding US farmers from a major market for their goods. China has dumped and unfairly subsidised a range of goods for the US market, undermining US domestic firms. In 2018 alone, the US government has found dumping or unfair subsidies on 13 different products. Source: The White House, US government, 29 May 2018