Hello can you please help with this case study, that's an exercice given by the teacher in order for us to get ready for the mid-term, he said he is going to give something like that, so we should train?

Its 3 questions but i am gonna ask just 1 question first in order for each question to be answered deeply, not just like that.

PS: the lecture starts from page 1 to 12, the rest is just exhibits.

QUESTION

1) Are Trump's accusations true or false? Analyze the arguments for and against each accusation.

HARVARD BUSINESS SCHOOL 9-719-034 REV: JANUARY 10, 2022 ALBERTO CAVALLO MARIANA CAL ANNE LASKI The U.S. - China Trade War When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore - we win big. It's easy!? - Donald Trump @realDonaldTrump, 5:50 am - March 2, 2018. On December 1, 2018, U.S. President Donald Trump and China's Leader Xi Jinping faced each other across a dinner table during a G20 meeting in Buenos Aires, Argentina (see Exhibit 1). After what Trump called an "amazing and productive meeting" the two leaders announced a truce in the ongoing trade war between their countries. The U.S. agreed to postpone for 90 days an increase from 10% to 25% in tariffs applied to a large number of Chinese goods, which had been initially scheduled for January 1, 2019. In exchange, the White House announced that China would purchase a "very substantial" amount of agricultural and other products from the United States, adding that it expected the two nations *to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services, and agriculture."The Chinese government simply stated that it was "willing to expand imports according to the needs of the domestic market" and that it hoped to "reach a concrete agreement on mutual benefit and win-win as soon as possible.*> The meeting had come after months of contentious accusations, tariff increases, and mounting retaliations. Despite Trump's assurances that China was sending "very strong signals" after the meeting* the outcome of the negotiations was highly uncertain. Would China provide enough concessions to satisfy the demands of the U.S.? Would the U.S. back down? Or would the trade war escalate, causing unprecedented disruptions - and opportunities - in global trade patterns? An Overview of Modern U.S. - China Trade (1978-2016) It doesn't matter whether the cat is black or white, as long as it catches mice." - Deng Xiaoping - Chinese Leader, 1962. Professor Alberto Cavallo and Research Associates Mariana Cal (Latin America Research Center) and Anne Laski prepared this case with the assistance of Fernanda Miguel and Floresria Hilo. This case was developed from published sources. Funding for the development of this case was provided by Harvard Business School and not by the company. HAS cases are developed solely in the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright @ 2119, 2022 President and Follows of Harvard College. To order copies or request permission to reproduce materials, call 1-500-545- 7685, write Harvard Business School Publishing, Boston, MA 02103, or go to www.hbop.harvardedu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. This document is authorized for use only by Alessandro Barattieri in 2023.719-034 The U.S. - China Trade War A pivotal moment in the history of U.S. - China relations came in February 1972, when China's Premier Zhou Enlai and Chairman Mao Zedong met with U.S. President Richard Nixon in Beijing. The trip, which Nixon called "a journey of peace," was a surprising attempt to rebuild the ties between the two nations after over twenty years of severed diplomatic and economic relations." A few months earlier, the U.S. government had ended the long-standing trade embargo, enabling U.S. firms to export a small number of goods to China - including farming manufacturing, and office machinery, as well as primary products, fertilizers, coal, and some chemicals.' Yet, for most of the 1970s, trade between the countries remained severely limited. Things started to change after Mao's death in 1976 and Deng Xiaoping's rise to power in 1978, when China embarked on a path of economic liberalization and unprecedented economic growth (see Exhibit 3). Formal diplomatic relations between the U.S. and China were restored in 1978, and trade volumes between the two countries grew from $1.1 billion U.S. dollars in 1978 to $4.8 billion in 1980. In the early 1980s, China accelerated its trade reforms to emulate the successful export-led growth experiences of other Asian economies such as Singapore, Japan, Hong Kong, and Taiwan. In particular, China created Special Economic Zones (SEZs) in coastal areas, which were exempt from central planning and some labor regulations and taxes. These SEZ's quickly became profitable export hubs." By the mid-1980s, more Chinese companies were allowed to export and import directly, taking advantage of relaxed regulations and tax benefits. China also allowed U.S. companies to invest in joint ventures with Chinese firms, as Deng publicly declared that China "needs to give up portions of the domestic market in exchange for advanced technologies we need."10 At the same time, a bilateral trade agreement signed in 1980 granted China "Most Favored Nation" treatment, effectively reducing tariffs on Chinese imports into the U.S. (although this status was conditional on a congressional report on human rights abuses, which in practice introduced some uncertainty). At first, Chinese exports focused on textiles and garments, but over time exports became more complex, particularly after the US. relaxed controls on American exports of advanced technology, such as jet engines and computers for both commercial and military use (see Exhibit 4)." China's exports were also aided during this time by a dramatic depreciation of the Chinese currency, which went from 1.5 yuans per dollar in 1980 to 8.4 yuans per dollar in 1995 (see Exhibit 5)- U.S. imports from China exceeded exports for the first time in 1985, and the U.S. trade deficit with China continued to grow consistently over the years (see Exhibit 6). In 1986, China applied to join the General Agreement on Tariffs and Trade (GATT), the World Trade Organization's (WTO) predecessor, but its membership was rejected." The U.S. and other trading partners were skeptical of China's willingness to reduce its import tariffs and licensing requirements, as well as its reluctance to allow foreign banks and investors to hold controlling stakes in Chinese companies.' U.S. - China relations were further strained after the Tiananmen Square protests in 1989, when the U.S. temporarily suspended weapon exports as well as military leaders' visits from both countries. During the 1990s, China increased its efforts to modernize its economy with more policy changes, including new regulatory and administrative frameworks for its banking industry, taxes, and corporate governance systems. China's leaders also renewed their efforts to join the WTO.1 A major hurdle was China's request to be granted "developing country status" in some sectors - so that they would have more time to meet WTO standards - which some large WTO members, including the European Union, Japan, and the United States, initially refused to accept. 15 Finally, in December 2001, China managed to join the WTO after signing an agreement with the US. that reduced Chinese tariffs on farming For a more detailed account of Chinese reforms during the 1560s and 90s, see: Vietor, Richard, and Julia Galef. "China: To Get Rich Is Glorious'," Harvard Business School Case 707-022, November 2006. (Revised October 2017.) 2 This document is authorized for use only by Alessandro Baraltieri in 2023.The U.5. - China Trade War 719-034 commodities, eliminated tariffs on IT products, and promised to remove foreign equity restrictions in banking, insurance, distribution, telecom, securities, professional, audiovisual, and travel services. 16 China's WTO membership led to a boom of its exports all over the world, including those to the US. (see Exhibit 7). As one observer remarked, "American imports from China rose by 92% in the three years following China's WTO entry, having risen by just 46% in the three previous years.* 17 By the time President Barack Obama was elected in 2008, the U.S. current account deficit with China had reached $296 billion, about half of its total current account deficit with all countries (see Exhibits 7 and 8). The Global Financial Crisis in 2008-09 resulted in a temporary reduction of the current account deficit of the U.S. with China, but the Chinese economy recovered quickly, and exports to the US. continued to grow. Over time, economists increasingly fretted about the problem of "Global Imbalances," with the U.S. experiencing a persistent current account deficit financed by Asian countries with unusually high savings rates and large currency account surpluses. China, in particular, had accumulated a massive amount of U.S. Treasury securities (see Exhibit 9), and many observers worried about the potential instability that sudden changes could have on the value of the dollar and the U.S. economy. 1" In the early 2010s, the Obama Administration pursued dozens of trade cases against China at the WTO, with little success. By 2016, the Chinese share of global exports reached 13.8%, the highest level experienced by any country since the U.S. in 1968.20 Accordingly, in 2016, the U.S. tried to prevent China from setting trade rules in the Asia-Pacific region by signing a multilateral trade agreement called the Trans-Pacific Partnership (TPP), which included 11 other countries and accounted for nearly 40% of global economic production. China had its own trade agreement for the region - called the Regional Comprehensive Economic Partnership (RCEP) - which included Indonesia, Malaysia, the Philippines, Singapore, Thailand, Japan, Korea, Australia, New Zealand, and India, and represented almost 27% of the world's GDP. Like the TPP, the RCEP focused on trade in goods and services, investments, and dispute settlement mechanisms but excluded regulations on labor, food safety, and environmental standards.?1 By the end of Obama's presidency, the level of U.S. skepticism toward China's policies and their impact on the U.S. economy was on the rise. As a result, during the 2016 presidential election, Donald Trump's complaints about China fell on sympathetic ears. The U.S. - China Trade War We can't continue to allow China to rape our country, and that's what they're doing. It's the greatest theft in the history of the world. - Donald Trump, campaign rally, May 2, 2016.") Trump's Accusations As early as 2011, Donald Trump shared his unforgiving views on China via his Twitter account: "China is neither an ally nor a friend - they want to beat us and own our country." Over time, his language and tone became increasingly hostile, often placing the blame on prior U.S. administrations for being too soft on China. In 2012, he tweeted, "China is robbing us blind in trade deficits and stealing our jobs, yet our leaders are claiming "progress" SAD!"25 Some of the accusations seemed outrageous, such as when he tweeted in 2012 that "The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non- This document is authorized for use only by Alessandro Baraltieri in 2023.719-034 The U.S. - China Trade War competitive."> But the bulk of Trumps' arguments were echoing complaints that appeared to resonate with a large share of the U.S. population. Currency Manipulation One of the earliest accusations leveled by Trump on China was that it devalued its currency to gain an "unfair" trade advantage. The claim was not new, dating back to at least the early 2000s. In 2009, Obama's Treasury Secretary had openly accused China of resorting to "currency manipulation" by fixing the exchange rate. After a G20 summit, Obama stated that China's currency was purposefully "undervalued" to foster exports, a practice that, he claimed, annoyed other Chinese trade partners as well as the United States. However, the Treasury Department chose to maintain the formal assertion that China was not a "currency manipulator," a charge that would have forced the U.S. Congress to take trade measures against China." As a candidate, Trump fully embraced the currency-manipulator accusation. During a campaign rally in June 2016, he stated, "The single biggest weapon used against us and to destroy our companies is devaluation of currencies, and the greatest ever at that is China. Very smart, they are like grand chess masters. And we are like checkers players. But bad ones." # Trump later promised that, if elected, he would formally label China as a "currency manipulator."" Once elected, he broke this promise. In the first few months of his presidency, Trump prioritized China's support in negotiating a deal with North Korea on their nuclear weapon development program. In April 2017, he tweeted, "Why would I call China a currency manipulator when they are working with us on the North Korean problem? We will see what happens!"30 China repeatedly argued that the currency manipulation accusation was groundless. Those supporting this view could point out the fact that the Renminbi was allowed to appreciate approximately 25% between 2005 and 2015 (see Exhibit 5).3 But critics argued that the Chinese currency was still "undervalued" relative to its worth in a free-floating market. Indeed, the Chinese government intervened extensively in the foreign exchange market during this time, buying foreign exchange reserves and implementing strict capital controls. Under increasing international pressure, in 2015, China attempted to liberalize its foreign exchange market - and contrary to what many in the US. expected - the currency's value immediately plummeted. To some observers, this was an indication that the Renminbi was not really undervalued; otherwise, "it would have risen instead."" Consistent with this view, in subsequent years, the IMF often concluded that China's currency was "broadly in line with fundamentals."> In 2018, Premier Li Keqiang publicly stated: "Persistent depreciation of the RMB will do more harm than good to China. Therefore, we will not engage in competitive devaluation,"* echoing similar statements made by other Chinese leaders in the past. Transfer of wealth Trump often argued that "China has been taking out massive amounts of money & wealth from the U.S. in totally one-sided trade..." As its exports to the US. grew, China accumulated a massive amount of U.S. Treasury securities. In 2000, it held only 6% of all U.S. Treasury securities outstanding. By 2018, China was effectively the largest foreign creditor to the U.S. government, with 18% of all foreign holdings of U.S. Treasury securities. Trump's supporters often argued that the same money the U.S. was paying to the Chinese was lent back to the U.S. to purchase even more Chinese goods and perpetuate the debt cycle. Others feared China's potential sale of its huge Treasury holdings, which would quickly depress U.S. bonds, raise U.S. interest rates, and severely affect U.S. monetary and fiscal policies. The "one-sided trade" argument seemed to rely on a mercantilist view that exports are "good" and imports are "bad,"" exposed by one of Trump's main trade advisors, Peter Navarro, in a campaign document in 2016: This document is authorized for use only by Alessandro Baraltieri in 2023.The U.5. - China Trade War 719-034 The growth in any nation's gross domestic product (GDP) - and therefore its ability to create jobs and generate additional income and tax revenues - is driven by four factors: consumption growth, the growth in government spending investment growth, and net exports. When net exports are negative, that is, when a country runs a trade deficit by importing more than it exports, this subtracts from growth.* Chinese leaders proclaimed that they wanted to ensure *mutually-beneficial and win-win cooperation between China and the U.S. in trade and economy," as "China benefits remarkably from the strong synergy, while the U.S. also reaps extensive economic benefits from the opportunities and results generated by China's growth.*39 China supporters argued that U.S. consumers were enjoying lower prices, an unprecedented amount of variety in consumer goods, and that the real cause of the U.S. trade deficit was the fact that China was able to produce the goods that the U.S. wanted to consume at a much lower cost. Stealing Jobs During his campaign, Trump often claimed that "disastrous trade deals" had led to the loss of millions of manufacturing jobs in the U.S. As a president, he continued to accuse China of causing the demise of the U.S. manufacturing sector. The logic was simple facing competition from inexpensive Chinese products, many American manufacturing firms had shut down or outsourced jobs to China. In January 2018, Trump stated: "We've lost, over a fairly short period of time, 60,000 factories in our country - closed, shuttered, gone. Six million jobs, at least, gone." While the numbers were not precise, there was truth in his statement. U.S. manufacturing jobs dropped 34% in the 1998-2010 period, "and academics had documented the connection to China's rise in manufacturing. David Autor, an MIT economist, had argued that "It's certainly not the case that all of U.S. manufacturing job loss after 2001 is due to China's WTO accession [. . ] but conservatively, 40 percent of the decline between 2001 and 2007 can be attributed to that source.* 4 However, some analysts argued that Trump's view of China's labor market and its impact on U.S. jobs was outdated. Wages had risen significantly in China over the years, and according to a Boston Consulting Group report in 2015, *the costs of manufacturing in China's major export-producing zone were [then] almost the same as the United States."42 Others believed that there was nothing the U.S. could do to reverse the trend. The editor of The Economist, for example, argued that "the goal of rolling back decades of American deindustrialization is a pipe-dream" and that "should America succeed in forcing supply chains back onshore, it will find that many fewer jobs are attached, because of rapid automation"43 Lack of Reciprocity Trump's remarks for more fair trade were often linked to the need for symmetry and reciprocity in the bilateral trade relationship. For example, in August 2018, he tweeted: "When a car is sent to the United States from China, there is a Tariff to be paid of 2 12%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE - going on for years!" " The average tariff in China (weighted by sectoral trade volumes) was indeed much higher than in the U.S. but it had consistently fallen over time - particularly after China joined the WTO (see Exhibits 2 and 3). In fact, using this metric, China could claim that it was now less protectionist than other large developing countries such as India and Brazil (see Exhibit 10). IP Theft and Forced Technology Transfers Trump strongly accused China of copyright infringements, cyberespionage, and forced technology transfers, * amplifying similar claims raised by previous administrations. Copyright infringements and pirated goods were an old complaint about China, which some estimated to cost over $255 billion to the U.S. each year." Chinese officials This document is authorized for use only by Alessandro Baraltieri in 2023.719-034 The U.S. - China Trade War acknowledged that there was "a lot of room for improvement" and frequently promised more crackdowns on pirated goods and exports. Cyber espionage had already raised tensions between the two countries in 2015 when the FBI accused China's government of "playing a significant role" in a 53% surge in economic espionage cases. The US. threatened China with sanctions, but after a short negotiation, Obama and Xi signed an agreement to stop government-sponsored cyberattacks "that steal corporate records for economic benefit."" Hackers were not the only issue. Often the Chinese government was accused of supporting firms blamed for stealing intellectual property, such as in the case of technology giant Huawei. For years, the U.S. labeled the company a national security threat, accusing it of selling equipment to tap or disable U.S. communication networks. " The company repeatedly denied the accusations, as well as any connections to the Chinese government." Trump was particularly adamant on denouncing China's "forced technology transfers": the implicit requirement that U.S. companies share technology with Chinese firms in order to secure market access. The practice was old, and many firms took it as a normal cost of operating in China, but complaints increased as China became a strong rival in sectors such as chemicals, computer chips, and electric vehicles. The Chinese government argued that the partnerships are voluntary and "American companies in China have received huge returns [. ..] and are the biggest [ beneficiaries] of technological cooperation.*5 But critics pointed to the Chinese government's attempts to pressure "U.S. partners in joint ventures to relinquish technology, using local courts to invalidate American firms' patents and licensing agreements, dispatching antitrust and other investigators [as a form of retaliation], and filling regulatory panels with experts who may pass trade secrets to Chinese competitors." VP Mike Pence summarized the administration's position on these issues in November 2018: To win the commanding heights of the 21"-century economy, Beijing has directed its bureaucrats and businesses to obtain American intellectual property - the foundation of our economic leadership - by any means necessary. Beijing now requires many American businesses to hand over their trade secrets as the cost of doing business in China. It also coordinates and sponsors the acquisition of American firms to gain ownership of their creations. Worst of all, Chinese security agencies have masterminded the wholesale theft of American technology - including cutting-edge military blueprints. And using that stolen technology, the Chinese Communist Party is turning plowshares into swords on a massive scale.53 A particularly contentious program was the "Made in China 2025" initiative, launched in 2015 by Xi Jinping. According to Trump, this was at the center of China's recent push to "take over, economically, the world."" The official goal was to modernize Chinese manufacturers by providing state support and funding, pushing them to become global technology leaders in areas such as electric vehicles, aerospace, and robotics. According to the WSJ, by late 2017, "the Import-Export Bank of China had supported China 2025-related lending of nearly 700 billion yuan ($102 billion) according to state media. Funding from other government sources adds up to hundreds of billions more." As trade tensions escalated, Chinese leaders stopped mentioning the plan, and Trump publicly declared, "China got rid of the China '25 because I found it very insulting." S Threat to National Security Despite their different approaches to diplomacy, both Obama and Trump faced Xi Jinping's ambition for his country's growing prominence on the global stage. As the world's second-largest economy, China cultivated its international economic influence by spearheading projects such as the Belt and Road Initiative and overtaking the rest of the world in overseas lending to developing countries." The possibility that China could soon become the largest This document is authorized for use only by Alessandro Baraltieri in 2023.The U.S. - China Trade War 719-034 economy in the world raised many concerns in Washington. Indeed, in a controversial speech in November 2018, Vice President Pence labeled China as "the foremost threat to U.S. security" and even accused Beijing of interfering in America's democratic process." Pence said the U.S. had hoped economic liberalization would bring it into an international partnership. One observer noted, "The American establishment believed that a more liberal China would be less likely to challenge the U.S. on the international stage. [. . .] But political developments in Xi's China have refuted the expectations of the liberal internationalist worldview that shaped successive American presidencies. China has not become more democratic. Nor is it any longer willing to live quietly within a U.S.-designed and dominated world order.*59 The Trade War Escalates As the Chinese saying goes, it is only polite to reciprocate. - Statement of the Chinese Embassy in the United States. 60 Just a few days after taking office in January 2017, Trump announced that the U.S. was pulling out of the TPP and that he was considering the imposition of tariffs on imported aluminum and steel." Tensions subsided in the following months, when according to some observers, "the more moderate views of his chief economic adviser Gary Cohn and senior adviser Jared Kushner, Trump's son-in-law, have balanced the harder-line nationalist views of senior adviser Stephen K. Bannon and Peter Navarro, director of the National Trade Council."62 An auspicious moment came in April 2017, when President Xi visited the U.S. and met with Trump at his resort in Mar-a-Largo. The two leaders announced a framework for a 100-day plan that could ease economic concerns on both sides. Commerce Secretary Wilbur Ross and Vice-Premier Wang Yang were chosen to lead the talks between the two countries. Central to the discussions was the inexpensive Chinese steel that the U.S. negotiators believed was flooding global markets and putting US. steelworkers out of jobs. According to the WSJ, the motto of Mr. Ross' negotiation team was " no steel, no deal.*63 After several months of negotiations, the Chinese eventually agreed to reduce production at a higher pace than they had previously promised. But in Washington, the proposal was labeled as "little more than a repackaging of past unfulfilled promises." The negotiations ended, and Robert Lighthizer, a former steel-industry lawyer who, according to media reports, "resented how Chinese imports had battered his industrial clients," became the new U.S. Trade Representative.4 Trump publicly appeared to be getting impatient. In August, his administration launched investigations under "Section 301 of the Trade Act of 1974," which "gives the U.S. Trade Representative broad authority to respond to a foreign country's unfair trade practices." Shortly after, the U.S. International Trade Commission announced that imports of solar panels and washing machines had caused "serious injury" to the U.S. and recommended that President Trump impose "safeguard" restrictions. In November, Trump visited China. The trip had raised expectations that the two countries could find ways to settle some of the trade tensions, but no significant deal was made." According to the Wall Street Journal, Lighthizer told Trump, "They're playing you," and spoke so bluntly in the meetings that some of his Chinese counterparts claimed to be offended. On January 22, 2018, President Trump introduced safeguard tariffs on $8.5 billion of solar panel imports and $1.8 billion in washing machines imports. These tariffs affected imports from all foreign This document is authorized for use only by Alessandro Barallieri in 2023.719-034 The U.S. - China Trade War countries, but the bulk of these came from China and South Korea. " Both countries immediately filed complaints with the WTO" (see Exhibit 11). In February, the Commerce Department released a report concluding that imports of steel and aluminum threatened U.S. national security by "weakening our internal economy" and "shrinking [our] ability to meet national security production requirement in a national emergency.*? On March 8, President Trump announced a 25% tariff on steel imports ($10.2 billion in 2017) and a 10% tariff on aluminum imports ($7.7 billion in 2017). These tariffs were imposed on imports from all countries, with a temporary exception granted to Mexico and Canada." The decision raised alarms in many countries, as only 2% of U.S. steel imports came from China at the time." Additional temporary exceptions were granted to the EU, and permanent exemptions were eventually granted to South Korea, Brazil, Argentina, and Australia. On June 1, when the new tariffs took effect, Canada retaliated with tariffs on $12.8 billion of U.S. imports," while the EU and Mexico each retaliated with tariffs on $3 billion of imported US. goods. In all cases, the retaliation tariffs affected a wide variety of goods, ranging from Bourbon to Harley-Davidson motorcycles." In early April, Trump publicly threatened to impose the first round of major tariffs specifically targeting Chinese goods. Treasury Secretary Steven Muchin, often described by the press as "a moderate looking for a deal, " convinced the president to approve a new trade mission to Beijing The negotiating team included Lighthizer and White House trade advisor Peter Navarro, who, in his 2011 book "Death by China," claimed that China's "perverse form of capitalism combines illegal mercantilist and protectionist weapons to pick off American industries, job by job." According to a media report, 'On the first day of talks, Lighthizer presented U.S. demands that called China to reduce its $375 billion trade surplus with the U.S. by $200 billion within two years, to scrap policies and subsidies that supported favored industries, and to pledge not to retaliate." The negotiations quickly fell apart, with Trump allegedly telling his advisors, "Bring me tariffs.*76 On June 15, the U.S. formally announced the imposition of 25% tariffs on $50 billion of Chinese imports. On the same day, China announced a retaliation with almost identical trade volumes and implementation schedules. In both countries, the tariffs were introduced in two stages, with the first $34 billion imposed on July 16, 2018, and an additional $16 billion on August 23. The U.S. initially focused on intermediate goods in an attempt to limit the impact on consumer prices. The Chinese targeted U.S. soybeans and vehicles but excluded aircraft." The soybean tariffs were particularly worrisome for the U.S., given that over 57% of all U.S. soybean exports ($30 billion) were going to China at the time." On September 17, the U.S. announced plans to impose a third round of tariffs affecting an estimated $200 billion of U.S. imports from China. The tariffs would be introduced at 10% on September 24 but were scheduled to increase to 25% on January 1, 2019." China immediately promised to retaliate, but this time it could not match the volume of trade impacted, given that it only imported a total of $130 billion from the U.S. in 2017 (see Exhibit 4)." By the time this new round of tariffs was implemented, approximately 55% of the total value of U.S. imports from China and 85% of China's imports from the US. were affected. Chinese officials complained that "In its Section 301 report and other ways, the current U.S. administration stigmatizes China by accusing it of economic aggression, unfair trade, IPR theft, and national capitalism. This is a gross distortion of the facts in China-U.S. trade and economic cooperation. This is disrespectful to the Chinese government and people as well as incompatible with the real interests of the American people." They also claimed that the investment and trade restrictions imposed by the U.S. "distort market competition, hamper fair trade, and lead to breakdowns in global This document is authorized for use only by Alessandro Baraltieri in 2023.The U.5. - China Trade War 719-034 industrial chains [that] are detrimental to the rules-based multilateral trading system and severely affect the normal development of China-U.S. economic and trade relations." China's leaders claimed that Chinese-American relations were not only key to "the well-being of the peoples of the two countries, but also world peace, prosperity, and stability. Cooperation is the only correct option for China and the U.S., and only a win-win approach will lead to a better future. China's position is clear, consistent and firm.*8 Impact on the U.S. Economy China is targeting our farmers, who they know I love & respect, as a way of getting me to continue allowing them to take advantage of the U.S. They are being vicious in what will be their failed attempt. We were being nice - until now! China made $517 Billion on us last year. - Donald Trump @realDonaldTrump, July 25, 2018. The higher tariffs did not lower the country's trade deficit with China, which rose to $106 billion in the third quarter of 2018, compared to $92.9 in the same quarter of 2017 (see Exhibit 6). This increase resulted from a remarkable rise in U.S. imports from China. Some analysts argued that importers were increasing orders and inventories to avoid the anticipated escalation in tariffs in the following quarter. Others believed that Chinese firms could find replacements for US. agricultural products but that American importers were having a harder time replacing Chinese goods." The tariffs provided some additional revenue for the U.S. government. In particular, the steel tariffs collected $1.4 billion in revenues in four months," as Trump tweeted, "I am a Tariff Man...MAKE AMERICA RICH AGAIN."" However, as with any tax, there were questions about how the incidence of the tariffs would play out, with different views on who would ultimately bear the burden. The Trump administration believed the burden would eventually fall on the Chinese exporters, who would be forced to reduce their export prices. But the prices that U.S. importers paid for Chinese goods (excluding tariffs) did not fall between 2017 and 2018 (see Exhibit 12a). Initially, the bulk of the tariffs was being paid by U.S. importers, although a standard prediction among economists was that the extra cost would be quickly "passed-on" into consumer prices. Indeed, when tariffs on washing machines were imposed in January 2018, the price index for "Laundry Equipment" produced by the U.S. Bureau of Labor Statistics increased by 17% in three months, the biggest gain in more than 40 years. Appliances were only 0.01% of the total consumer price index, but many argued that it was a worrying sign of what would happen if the tariffs were extended." However, when the third round of China tariffs was implemented in September - affecting a much larger share of consumer goods imports - aggregate prices remained relatively stable, and there were no reports of significant increases in the prices of Chinese goods impacted by the new tariffs. The Trade War had a major impact on the U.S. stock market, which suffered a 20% drop between October and December 2018 (Exhibit 13). Uncertainty about a potential deal increased the volatility of the market, and many investors feared that this would undermine business and consumer confidence in 2019. Some economists were also concerned about a potential economic slowdown due to the trade war. The US. Congressional Budget Office (CBO) reported that the "tariffs imposed by the Trump administration may dent the economy and hit business confidence." In contrast, Secretary Muchin announced in January 2019 that "We see no indication whatsoever of a recession on the horizon," adding that the trade dispute with China is not hurting the U.S. and that "there is still a very good case for 3 percent growth this year."" Indeed, the jobs data released in January seemed to support Mnuchin's claim. The WSJ noted, "the U.S. labor market notched its 100th straight month of increased employment in January 2019 while sustaining robust wage growth, passing the tests posed by a federal government shutdown, market volatility, and uncertainty about global economies.*% This document is authorized for use only by Alessandro Baraltieri in 2023.719-034 The U.S. - China Trade War The U.S. sector that seemed most directly impacted by the trade war was agriculture. After China retaliated with a 25% increase in tariffs for soybeans, the price of this crop in Chicago fell by roughly that same amount, creating a wedge of 25% with the price obtained by farmers in other soybean- producing countries like Argentina and Brazil (see Exhibit 12b). Exports of soybeans to China collapsed, falling 62% in the first ten months." China's retaliation affected mainly the Farm Belt states, where much of Trump's electoral power came from (see Exhibit 13). In July 2018, the U.S. government pledged subsidies of up to $12 billion to farmers affected by the trade war."In spite of these efforts, by January 2019, the number of farm bankruptcies appeared to be reaching levels not seen in more than ten years. 95 Impact on China's Economy China just announced that their economy is growing much slower than anticipated because of our Trade War with them. They have just suspended U.S. Tariff Hikes. U.S. is doing very well. China wants to make a big and very comprehensive deal. It could happen, and rather soon!!" - Donald Trump @realDonaldTrump, July 25, 2018. In 2018, China's economy slowed its growth pace to its lowest level since 1990, at 6.6% per year. The economic slowdown - more severe than Beijing had anticipated - was compounded by the trade war with the U.S. and falling international demand. Some Chinese exporters, amidst the uncertainty, appeared to have postponed investments and even started laying off employees. China's unemployment rate rose to 4.9% in December, up from 4.8% in November. Xi Jinping's efforts to restrain debt and avoid financial risks also added to China's slowdown, as local governments were forced to reduce their spending on infrastructure." China's exporting regions in the south seemed to have suffered the most. " On January 4, 2019, the head of the Chinese National Bureau of Statistics recognized that "The economy faces downward pressure" but sought to lower the anxiety about the trade war by noting that "the economy overall is driven by domestic demand."" Several other indicators pointed to a mild slowdown, including property sales, industrial output, and domestic retail sales. Unfortunately, there are always lingering doubts about the quality and reliability of China's official statistics.100 Many viewed China's slowdown as the main reason why Xi might be willing to make concessions to the United States. The idea that "Beijing might blink first in talks because the Chinese have much to lose" 101 was becoming popular in the U.S. media, particularly after President Xi Jinping eliminated an additional tariff on auto imports in December 2018, just a few days before the G20 truce meeting. At the same time, Chinese leaders could potentially stifle dissent and re-direct resources more quickly to "outlast Mr. Trump in a trade standoff." 102 Impact on Other Countries China's economic slowdown shook its commercial partners around the world. "The falloff in factory production and consumption is taking a toll on how much China buys from companies elsewhere in Asia, the U.S. and Europe."" China had become a major player in global trade: throughout the 2010s, "it accounted for a fifth of the total growth in global exports and imports, and played a key role in supporting demand during periods of weakness in other countries, such as during the Eurozone's financial crisis."104 However, China's troubles were also an opportunity for other Asian countries to compete for a larger share of global manufacturing exports. 10 This document is authorized for use only by Alessandro Baraltieri in 2023.The U.S. - China Trade War 719-034 The agricultural tariffs introduced by China on U.S. soybeans were seen as an opportunity in countries such as Brazil and Argentina. For example, Brazil "experienced a record in soybean exports in April 2018, and by August, its exports to China has grown to 66% of Chinese imports, as compared to 48% the year before."1 The trade war provided not only a short-term opportunity to sell more soybeans to China, but it could also potentially cause long-lasting changes in international trade patterns by forcing China to speed up its desire to diversify its trading partners. "America First": Renegotiating NAFTA President Trump's trade policy actions extended beyond China to include attacks on U.S. allies and other countries. The most important renegotiation was NAFTA. Trump's 2016 campaign speeches had condemned it as "one of the worst trade deals in history."10 Focusing on Mexico, Trump's supporters often argued that NAFTA had not raised labor standards sufficiently to level the playing field for American workers. "The claim was consistent with Trump's other complaints about illegal immigration and the need for a wall along the U.S. border with Mexico. During the G20 meeting in Buenos Aires, the U.S. signed a new deal with Mexico and Canada - rebranded as the U.S.-Mexico-Canada Agreement, or USMCA - approximately eighteen months after Trump had first threatened to pull out of NAFTA. The negotiations had been unusually quick for this type of trade deal. The Trump administration believed that the new deal provided more favorable terms for the U.S., but critics argued that the changes were "a backward step for free trade" and that the president was simply "taking a victory lap" for "a crisis of his own making."1 The USMCA required Canada to lower dairy restrictions for U.S. milk and raised to 75% the portion of a car that had to be produced in the U.S., Mexico, or Canada for the car to be exempt from tariffs (up from 62.5% under NAFTA) (see Exhibit 15). It established that 40% to 45% of the content of a car had to be made by workers earning at least $16 per hour. The Trump administration hoped this would shift some production to the United States, but his critics argued that it would mainly increase prices for consumers. In 2017 Americans spent $498 billion on cars and parts while Canadians spent $11 billion on dairy." The USMCA also introduced a "sunset" clause that made the agreement expire after sixteen years (the U.S. team originally wanted it to be five years), with a renegotiation every six years."!1 Trump refused to remove the steel and aluminum tariffs, which supporters believed showed that "tough tactics have won him concessions."12 Justin Trudeau, Canada's Prime Minister, emphasized "stability" as the greatest achievement of the new deal. 113 As the USMCA was being signed, Trump referred to the presidents of Mexico and Canada as his friends, claiming, "This has been a battle, and battles sometimes make great friendships." It But his critics argued that his "America First" strategy had antagonized the same countries that could have been powerful allies against China. Indeed, before 2018, Canada, Europe, and other U.S. allies seemed to share some of Trump's objections to Chinese trade and business policies. In particular, the Financial Times noted that "Mr. Xi's signature Belt and Road Initiative is viewed increasingly as an effort to translate economic weight into geopolitical hegemony." 15 Trump's unilateral stance, often portraying multilateralism as contrary to American interest, made it less likely that other countries would support the U.S. trade tactics against China. Hoping for a Deal We are either going to have a REAL DEAL with China, or no deal at all - at which point we will be charging major Tariffs against Chinese product being shipped into the United States. Ultimately, I believe, we will be making a deal - either now or into the future. 116 11 This document is authorized for use only by Alessandro Baraltieri in 2023.719-034 The U.S. - China Trade War - Donald Trump @realDonaldTrump, December 5, 2018. For the previous 40 years, China and the U.S. had both embraced globalization and trade, based on an apparent understanding of how the other would behave. As some observers noted, "the Chinese assumed that the U.S. would continue to support free trade, while the Americans believed that economic liberalization in China would eventually lead to political liberalization."117 The year 2018 proved both of them wrong: President Trump imposed a large number of tariffs while China introduced a constitutional change that eliminated presidential term limits. As the Trade War escalated, it became clear that both leaders were determined to take a strong stance in defense of their own interests. The G20 truce, reached on December 1, 2018, offered some hope that a deal would be reached, but speculation was rampant as the deadline to come to a long-term trade agreement by March 1, 2019, was approaching. On January 31, President Trump announced that "No final deal will be made until my friend President Xi, and I, meet in the near future to discuss and agree on some of the long-standing and more difficult points," and emphasized that trade representatives were working to *do a complete deal, leaving nothing unresolved on the table. All of the many problems are being discussed and will be hopefully resolved," effectively setting a high bar for what could be accomplished before the deadline, when tariffs on $200 billion in Chinese imports were set to more than double. " Trump's hope clashed with the opinion shared by analysts and business leaders who believed that it would take time to get China to make significant concessions. Indeed, as China hawks in Trump's own administration had been saying all along, *extracting real reforms from China that fundamentally alter its economic model - and making sure they stick - would entail a long grind.*120 12 This document is authorized for use only by Alessandro Baraltieri in 2023.The U.S. - China Trade War 719-034 Exhibit 1 The G20 Dinner in Buenos Aires Source SAUL LOBB/APP, retrieved from https://america.cgin.com/2018/12/01/xi-trump-expected-to-talk-trade-at- working-dinner, accessed February 2019. Note: Chinese delegation: Xi Jinping, Deputy Finance Minister Liu He, Communist Party Foreign Affairs Director Yang liechi, State Councilor Wang Yi, Commerce Minister Zhong Shan, and National Development and Reform Commission Chairman He Lifeng. U.S. delegation from left to right: John Kelly, Peter Navarro, John Bolton, Mike Pompeo, Donald Trump, Steven Mouchin,, Robert Lighthizer (not pictured), and Jared Kushner (not pictured). 13 This document is authorized for use only by Alessandro Baraltieri in 2023.719-034 -14- Exhibit 2 US. Main Economic Indicators (1980 - 2017) 1980 1935 1990 1995 2000 2001 2002 2003 2004 2006 2006 Real GDP (Constant LCU, billions) 6 529 7.6 85 10.295 12.713 12,837 13.066 13.433 13.94 14 40 14 792 Real GDP Growth (X) -0.24 1.92 2.72 4.09 0.98 1.79 2.81 3.79 3.35 2.67 Per capita Real GDP, 2011 PPP $ 19476 45979 47260 4 4697 49762 50599 GIGOP 54 65 66 67 67 67 67 67 IGDP 23 24 24 22 22 23 23 23 GIGOP 16 16 14 15 15 15 15 15 WGOP 10 7 9 10 10 10 11 M/GDP 10 10 11 12 13 13 13 15 16 16 Agriculture (% of GDP) 1 1 Industry (% of GDP) 22 21 21 21 21 21 22 Services (% of GOP] 72 74 75 76 74 74 74 Population (millions) 227 237 240 282 284 287 290 292 208 Unemployment Rate (x] 7.1 7.2 5.7 4.0 4.7 5.8 6.0 5.5 5.1 4.8 Goverment Deficit (% of GOP) -1.8 43 -3.7 -2.0 2.2 0.0 -2.8 -4.1 -3.8 -3.0 -2.1 Inflation Rate (x, CPI) 13.6 3.6 2.8 2.8 1.6 2.3 2.7 3.4 3.2 Lending Interest Rate ($) 15.3 9.9 10.0 9.2 6.9 4.7 4.1 4.3 6.2 8.0 Fomign Reserves (current USD, millions 171.412 117,981 173,093 175 995 128,399 130,076 157 763 184,024 190,464 188 259 221 088 Tari" rate applied, weighted mean, all products ( %) 3.92 2.94 2.10 2.11 2.16 1.96 1.79 1.75 1.70 2007 2004 20 10 201 2012 2013 201 2015 2016 2017 This document is authorized for use only by Alessandro Baraltieri in 2023. Real GDP (Constant LCU, billions) 15,086 15,011 14,694 14 954 15,204 16,642 16 802 16,204 16,672 16 920 17.304 Real GDP Growth (*) 1.78 -0 20 -2.76 253 1.60 2 22 1 58 2.57 2.85 149 2.27 Per capita Real GDP. 2011 PPP $ 51017 50354 48538 19374 49784 30 520 51004 51922 53008 53398 54225 CIGOP 67 68 68 69 68 65 68 68 69 L/GDP 22 21 18 19 20 20 G/GOP 15 16 17 16 16 15 15 14 14 14 XGOP 12 13 11 12 14 14 14 14 13 12 12 MIGDP 16 17 14 17 17 17 17 15 15 15 Agriculture (% of GDP) 1 1 1 1 1 1 Industry (% of GDP) 21 21 20 20 20 20 20 20 19 19 19 Services (% of GDP] 74 75 76 76 78 76 75 75 76 77 77 Population (millions) 301 304 305 309 311 313 316 318 321 323 325 Unemployment Rate (X} 4.6 5.8 93 9.6 9.0 8.1 74 6.2 5.3 4.9 44 Government Deficit (* of GDP) -2.4 -5.3 -10.2 10.1 3.8 Inflation Rate (%, CPI) 2.9 Lending Interest Rate (56) 8.1 5.1 Foreign Reserves (ourrent USD, millions) 277 548 294,045 404,094 137.267 448,508 405,942 451 285 Tari" rate applied, weighted mean, all products ( %) 1.54 1.57 1.66 Source: The World Bank: World Development Indicators. Note: "Preliminary estimates in 2017. Shaded columns are 5 years apart719-034 -15- Exhibit 3 China Main Economic Indicators (1980 -2017) 1990 1993 2004 2036 Real GDP (Constant LCU. billions) 4.378 11 440 17 300 18,746 20458 22,511 24,787 27,612 31,124 Real GDP Growth (*) 7 81 13 44 391 19 95 Per capita Real GDP. 2001 PPP $ 9.13 10.04 10.11 11,40 12.72 1.576 2 564 3 701 3 980 4 315 41718 5, 165 CIGOP 5,719 6,411 GOP 150 46 47 46 415 43 41 40 38 35 40 35 36 37 41 GIGOF 14 14 14 13 17 16 16 15 14 14 14 XAGOP 14 18 20 23 27 31 34 36 MIGOP 7 12 11 19 18 20 25 28 Agricullum IX of GOP 28 30 28 27 20 15 14 11 Industry (* of GOP) 41 13 12 46 47 Services (% of GOP; 41 41 42 Population (millions] 1951 1125 1204 1262 1271 1209 1206 1206 1303 131 1 Unemployment Rate (%) 49 18 25 29 3.1 36 40 4.3 43 4.2 4.1 Government Deficit (% of GOP) -78 4.7 -4.1 -0.9 -0.5 0.8 Nominal Exchange Rate [LOU per USD) 2 84 4.78 8.35 3.28 8.28 8.20 8.20 8.19 7.87 Change in Nominal Exchange Rate (%) 26 6 270 -31 90 -1.0 -2.7 Inflation Rate [%% CPI) 31 16 8 04 07 38 1.8 1.7 Lending Interest Rate (% 94 121 59 69 5.3 5.6 Foreign Reserves [ourrent USD, millions) 10,090 16,481 14,475 171.763 220 086 297 739 416,189 622,940 -31,409 1 080,765 Tariff rate applied, weighted mean. all products (: 14 7 14.1 4.8 This document is authorized for use only by Alessandro Baraltieri in 2023. 2007 2011 20 19 2014 2015 2016 2017 Real COP (Coralat LOU, billions) 35.55- 42.651 47.187 55,748 80.073 84.457 88.90- 73.521 78.594 Real GDP Growth (%) 14 23 $ 65 10 84 9154 7.86 7.30 8.10 6.90 Per capita Real GDP. 2001 PPP 7 285 7.948 3.652 9 526 10 384 11,146 11,951 12,759 13,570 14,401 15,309 C/GOP 37 36 36 37 39 38 41 43 46 47 44 GCOP 13 13 13 13 13 13 14 13 14 14 X/GDP 35 33 24 26 25 25 24 21 20 JOEMA 20 27 215 20 23 24 23 22 17 18 Agriculture (* of GDP) 10 10 10 10 9 9 9 9 Industry (* of GOP) 47 47 46 46 46 45 44 43 41 40 40 Services (* of GOP) 43 43 44 14 44 45 47 48 52 Population [millions] 1317 1324 1331 1337 1344 1350 1357 1354 1371 1378 1388 Unemployment Rate (%) 4.0 4.2 4.3 4.1 4.1 4.1 4.1 4.1 4.1 4.0 3.9 Government Deficit ( of GOP 29 1.3 0.1 1.5 1.5 1.3 0.7 -0.8 Nominal Exchange Rate (LCU per USD) 7.61 6.83 3.77 5.46 5.37 5.20 6.16 6.20 6.61 Change in Nominal Exchange Rate (%) -4.6 -17 23 Inflation Rate (%%. CPI) 715 -2.1 4.8 26 19 2.0 Lending Interest Rate (% 4.4 4.4 Foreign Reserves [ourrent USD, millions) 1,646 364 1,906 037 2,462 499 2,809 807 3,254 674 ELS CHE'E 3 800,039 3 405,253 3.097,658 3.215,681 Tariff rate applied, weighted mean, all products (%%) 4 47 3.54 3.63 Source: The World Bank: World Development Indicators, OECD (Government Deficit) and US. Federal Reserve Board (Nominal Exchange Rate] Note: Shaded columns have 5-year gaps.719-034 The U.S. - China Trade War Exhibit 4 U.S. - China Trade Composition (2016) Exhibit 4a U.S. Imports from China Broadcasting Office Machine Models Other Seats phplay Equipment Parts and Furniture Stuffed Animals 5.7% 1.9% us 2.6% 2.4% 2.2% Vehicle 14% Parts Computers 1.39 2.1% 9.8% Source MIT Observatory of Economic Complexity based on data from UN COMTRADE. Accessed March 2019. https://atlas media mit edu/en/ visualize/tree_map/b:92/import/usa/chn/show/2017/. Exhibit 4b U.S. Exports to China Planes, Cars Soybeans Crude Purelyum Helicopters, and/ or Spacecraft 2.9% 9.3% 1,7% 10% 8.7% Integrated in Turbines Circuits Gold 5.8% 20% Source MIT Observatory of Economic Complexity based on data from UN COMTRADE Accessed March 2019. http://atlas media mit edu/en/visualize/tree_map/ha92/export/usa/chn/show/2017/. 16 This document is authorized for use only by Alessandro Baraltieri in 2023.The U.S. - China Trade War 719-034 Exhibit 5 China's Exchange Rate (Yuans per USD) and Trade mytredgully Source FRED, Board of Governors of the Federal Reserve System (U.S.). Exhibit 6 U.S. Trade Balance, by Quarter - Selected Countries Trade Balance, quarterly. Not seasonally adjusted CAN MEX Billions of U. S. dollars M 2900 2016 20 12 2014 2016 2018 Years Source US. Census Bureau. 17 This document is authorized for use only by Alessandro Baraltieri in 2023.719-034 -18- Exhibit 7 US. Balance of Payments with China (1999 -2017, billions of U.S. dollars) 2004 2005 2010 2012 2013 2014 2016 3017 Current Account Balance -132 -173 -220 -282 -246 Not Balance of Goods -307 -263 -313 -328 -325 -341 -362 -331 -356 -124 -183 -203 -234 -259 -268 -127 315 Exports of Goods -319 -345 -347 -376 F. Imports of Goods 172 125 1 16 153 130 245 289 323 340 Not Balance on Services 463 506 Exports of Barvices NO - 39 Imports of Services BB9056597 Not Primary Income Primary Income Receipts Primary Income Payments Not Secondary Incame Financial Account 115 -183 Net Famion Direct Investment -186 This document is authorized for use only by Alessandro Baraltieri in 2023. FOl Outbound [Assets] FDI Inbound (Liabilities) Not Portfolio Invealmanta 405 -178 178 Outbound [Arants] -201 -113 Inbound (Liabilities) -23 217 Not Other Investments 120 T -23 Errors and Omissions" 58 37 23 -131 252 28 Source: U.S. Bureau of Economic Analysis.719-034 -19- Exhibit $ US. Balance of Payments with all Countries (1970-2017, billions of US, dollars) 2012 Current Account Balance JMJ -402 -491 -319 Balance of Goods -432 -743 -711 -8:31 -431 -446 427 -171 -349 475 -542 -403 -685 -432 -449 Exports of Goods -870 -141 -741 696 780 -807 Imports of Goods 813 1041 1165 1808 1070 1290 1563 7154 1636 1173 1611 1467 1272 1653 Balance on Services 2141 2240 2304 2214 2273 2208 2361 Exports of Services 153 204 280 338 230 263 249 256 Imports of Services 583 741 213 769 242 756 Primary Income Balance 409 486 461 481 492 610 642 Secondary Income Balance 1:30 211 207 205 218 204 193 Financial Account -102 -104 $ -113 -124 -119 Not Foreign Direct Imostment -714 -TAT 247 FDI Outbound (Assets) FDI Inbound (Liabilities] Not Portfolio Investments GEESES This document is authorized for use only by Alessandro Baraltieri in 2023. Outbound (Assets) Inbound (Liabilities) ENGBERENET Net Financial Derivatives Net Other Investments 20 Change in Reserves Emara and Omissions* T M E Source: International Monetary Fund Note: Shaded columns have 10-year gaps. "Includes the Capital Account.The U.5. - China Trade War 719-034 Exhibit 10 Tariffs Applied, Weighted Mean, All Products Globally, U.S. tariffs rank among the lowest Tariff rate, applied, weighted mean, all products (2016) No data 0.39% 4-7.9% 8-110% 12-159% Canada United States China 35% The Bahamas Chad 18.4% 6.3% Gabon Brazi Note: 2015 date for Azerbaijan, Bhutan, Cabo Verde, Comoros, Congo Republic, [ Salvador, Ethiopia, Fij, Guatemala, Honduras, Mauritania, Mongolia, Myaremar, Panama, Peru, Saudi Arabia, Sri Lanka, Thailand and Urbekistan. Source: World Development Indicators, World Bank (data as of March 1, 2018). PEW RESEARCH CENTER Source Pew Research Center, World Bank. 21 This document is authorized for use only by Alessandro Baraltieri in 2023.719-034 The U.S. - China Trade War Exhibit 11 2018 U.S. Tariffs and Retaliations DATE U.S. CHINA OTHER COUNTRIES January - Safeguard tariffs Files WTO dispute South Korea files WTO March 2018 . Solar Panels (+30%. dispute $8.5 bn) Washing Machines (+20% to +50%, $1.8 bn) March - National Security Tariffs Retaliation Retaliations (Canada, April 2018 . Steel (+25%. $10.2 bn) . Tariffs on $3 bn of U.S. Mexico, EU) . Aluminum (+10%, $ 7.7 imports (aluminum +10% to +25% on $3 to bn) waste, pork, fruits, nuts, $13 bn worth of U.S. and other U.S. goods products Temporary exemption to EU, Canada and Mexico. Permanent exemptions to South Korea, Brazil, Argentina, and Australia July 2018 China Tariffs - Stage 1 Retaliation . +25%% on $34 bin +25% on $34 bn August 2018 China Tariffs - Stage 2 Retaliation . +25%% on $16 bn +25% on $16 bn September China Tariffs - Stage 3 Retaliation 2018 * +10% on $200 bn +10% on $60 bn % are intermediate goods, % are consumer goods. December USMCA (new NAFTA) 2018 deal signed March 1, Scheduled increase on 2019 Stage 3 tariffs to +25% Source Casewriter, based on Bown, Chad, and Melina Kolb. 2018. "Trump's Trade War Timeline: An Up-to-Date Guide" https//pile.com/blogs/trade-investment-policy-watch/trump-trade-war-china-date-guide. 22 This document is authorized for use only by Alessandro Baraltieri in 2023.The U.5. - China Trade War 719-034 Exhibit 12a U.S. Import Prices from China (2016-2018) US Import Price Index from China 100.6 100.4 100.2 Price Index ( Dec 2003 = 100) 100.0 99.8 99.6 99.4 pr-17 Jul-18 Mar-17 Jul-17 Sep-18 May-17 Aug-17 Sep-17 Jan-18 Mar-18 Nov-18 Apr-18 Oct-17 Feb-18 Jun-18 May-18 Aug-18 Deo 18 Dec-16 Nov-16 Jun-17 Nov-17 Source US. Bureau of Labor Statistics, Import Price Index by Origin (NAICS): All Industries for China [CHNTOT], retrieved from FRED, Federal Reserve Bank of St. Louis; https//fred.stlouisfed.org/series/CHINTOT, December 21, 2021. Exhibit 12b Soybean Prices, U.S.A., Brazil, and Argentina (FOB, 2018) 440 -U.S.A. 420 Argentina 400 380 USS/Ton. 360 340 320 300 Jan-18 Feb-18 Source Novitas SA (http://www.novitas.com.ar/}, based on data from Thompson Reuters. 23 This document is authorized for use only by Alessandro Baraltieri in 2023.719-034 The U.S. - China Trade War Exhibit 13 U.S. Stock Market Indexes since January 1- 2018 FRED -4 10, NINTH IN Studed areas indicate U-S. recessions MOBIC NASDAG ON Group. SP Dow Jones indices LLC mytredgm Source FRED, Board of Governors of the Federal Reserve System (U.S.). Exhibit 14 States affected by Chinese retaliation on agricultural products Share of farm sector cash receipts in 2016 Hogs "Soybeans Apples Almonds AK Pork ME affected VT 1 block = 1% WA ID MT NO MN MI NY MA OR UT WY OH NI CT NV CO NE MO IL KY VA MD DE NM KS AR TN NC SC OK LA MS AL GA HI TX FL Source Visualization by The Wall Street Journal based on Ministry of Commerce of the People's Republic of China (list of products) and U.S. Department of Agriculture (cash receipts). https://www.wsj.com/ articles/trade-fight-threatens- farm-belt-businesses-1530529201, accessed February 2019. 24 This document is authorized for use only by Alessandro Barattieri in 2023.The U.S. - China Trade War 719-034 Exhibit 15 USMCA and NAFTA Comparison (Main Issues) USMCA NAFTA Cars The new deal increases the portion of a The current Nafta, which came into car that needs to be produced in North force in 1994, requires that 62.5 America to 75 percent to avoid tariffs. It percent of cars produced in the also requires at least 40 percent of that trade zone be made in North come from factories where the average America. There's no minimum- wage is $16/hour. wage requirement. Dairy U.S. dairy farmers will be allowed Dairy wasn't part of the original to sell more milk to Canada deal. The U.S. has long complained that Canada's system of domestic quotas protects its dairy farmers from foreign competition. Disputes The new deal severely restricts chapter Nafta has three kinds of dispute 11 between the U.S. and Mexico, while settlement systems. Chapter 11 eliminating it between the US. and provides a mechanism for solving Canada. Chapter 19 and 20 both disputes between companies and survived, virtually intact. Nafta governments. Chapter 19 allows for cross-border mediation when Nafta partners clash over dumping or subsidy cases. Chapter 20 governs disputes between states. Currency The new deal includes a new currency The current Nafta does not include chapter that commits the three countries a currency chapter. to maintain market-determined exchange rates and refrain from competitive devaluations of their currencies. Sunset Clause The US. had demanded a sunset clause There is no automatic sunset that would kill Nafta after five years clause under the current Nafta. But unless the countries agreed to extend any of the three partners can it. In the end, the countries settled on a withdraw from the agreement on 16-year term for the deal, with a review six months' notice. to identify and fix problems and a chance of a deal extension after six years. Source Dornan, Shawn, new Mayeda, Jenny Leonard, and Jeremy C. F. Lin. nd. "USMCA vs. Nafta." Accessed February 12, 2019. https//www.bloomberg.com/graphics/2018-nafta-vs-usmca/. 25 This document is authorized for use only by Alessandro Baraltieri in 2023