Lately, International news has reported about the endless trade war between China and U.S. that is happening and is getting sharper. Amadeo (2018) explained that trade war is the economic conflict when one country started to set the tariffs or quota on the imports product(s) or service(s) and other countries reciprocate with similar forms of policy aims to do a defensive measure. The trade war is related to the economy conflict between two or more countries to defeat each other regarding the countrys economic status.
According to the World Bank report, the USs economy is the largest in the world and followed by China. Gray (2017) argued that U.S. may be replaced by China because of the economic gap between U.S. and China is too close and now China is one of the fastest-growing large economy in the world. Although the USs economy is remaining in the first rank recently, U.S. should prepare to make the best strategy to maintain their throne in the worlds economy.
These situations can be one of the reasons why the trade war between China and U.S. is happening. On the other hand, the history of globalization also influenced the China-U.S. trade war. This essay aims to a deeper understanding regarding the nature of China-U.S. trade war and some impact on it.
2.1. Crude analysis of China-U.S. Trade Wars Natures
A China-U.S. trade war is officially started in 2018, it becomes the international news and got a lot of attention from most people around the world especially the people of the United State and China. U.S. president Donald Trump is the one who initially drove the trade war between China and U.S. that happening recently. Donald Trump started the China-U.S. trade war based on a misconception of the China and the economic status, which are the accusation that China has been depreciating their currency, the measurement that China got the large trade surplus and U.S. exports to China affected the decreasing American manufactures and taking their jobs (Jin, 2017). Other resource argued that there are three major reasons why U.S. initiating the trade war with China, which are; depression job invention in the U.S. because of USs trade deficit, assumption that China using illegal and unfair ways to obtain the U.S. technology at discounted cost, and consideration of the case that said China search the weakness of U.S. national security and international standing (Liu & Woo, 2018). Despite these perceptions of the nature of China-U.S. trade war, there is another reason through the approach from the long history of globalization perception. The China-U.S. trade war is included as the international political case that makes everyone confused because of it hard to identify which one the truth and no one knows the real purpose of the trade war because there is no valid resource regarding the political cases.
2.2. China Globalization History
China is one of the developed countries in the world that being successful in the field of business and is number two of the worlds economy. Despite it, before China reached this state, China was a poor country under the Chinese Communist Party. The domestic economy was isolated from the international economy before (Nolan, 2004), but nowadays China transformed to improve economic performance. The growing of Chinas economy is not only influencing the local economy status of China, but it also influences the worldwide economy state. After decades, China succeeds made a transition from the isolation domestic economy to the key player in the global political economy (Breslin, 2007). The transition forced China to resolve the relationship between economic changes and political system, and finding the necessary ways to improve economic performance (Nolan, 2004).
What is Globalization (n.d.) described globalization has an impact to the economic development and human well-being in society around the world that processing the interaction and integration of different nations. Nolan (2004) argued that Chinas globalization challenge is to figure out the best way to integrate the economy system in China with the worldwide economy. China can be reached to the recent state and become one of the countries with biggest economic power because China has been transformed through the transition from the isolated economy and their globalization efforts and strategies. Going Global is Chinas ambitions for global leadership and cooperation that evolved to reflect the domestic goals of becoming the innovation-driven company and reinforce the partys claim of the legitimacy (China Policy, 2017). It is not piece of cake for China to reach their current state, China had through a long history of the globalization.
Make a long story short, in 2001 China joined to the World Trade Organization (WTO) and according to Yue (2012) it was a big decision under the Hu-Wen reign and it was such a big risk for the Chinese businesses. Within the admission of China into the WTO in 2001, China started the first globalization strategy and claimed as Going Global 1.0 (China Policy, 2017). Yue (2012) argued that the natural trend of economic development of China is not because the economic success in the 1990s, but it is because the indictment to keep Chinas economy growing up so China can be the member of WTO as earliest as possible. Because of the Going Global 1.0 strategy is not really successful, another strategy is developed which is Going Global 2.0. Going Global 2.0 strategy is included the industry plan of Made in China 2025 strategy under the Xi-Li leadership.
2.3. The Relation between China-U.S. Trade War and Made in China 2025 Analysis
Made in China 2025 is the initial strategy of China to upgrade the Chinese industry that formed in 2015 and approved by Chinas State Council (Kennedy, 2015; Laskai, 2018). Made in China 2025 purposes to the new economic rising from the science and technology, innovation, service, and consumption to make national champion firms to be bigger and stronger and be able to engage with global commerce (China Policy, 2017). (Yue, 2012; Kennedy, 2015; Laskai, 2018) explained that Made in China 2025 strategy aims to be succeed in Chinas localization to raises up to 70% by 2025 regarding to the domestic content of core component and basic materials called as self-sufficiency and focused on 10 sectors, so China can reduce the technological dependence on foreign country indeed can export the high technology goods and raw materials.
Made in China 2025 strategy is not easy to accomplish, it is a national mobilization that needs huge economic evolution to speed up the technological development. Despite it, if the China globalization strategy successful, it will be harmful to the U.S. regarding the economic status and international market. Because of China globalization has increased and there is a sign of success, the U.S. tries to stop the China globalization for their own benefits. That approach is one of the potential causes of the main reason for the U.S. started the trade war with China. U.S. trade war that will be turned to tariff war is not purposing to China increases the import of American goods, and it is not also to change the legislation, all the more not to stop the technology transfer to China. The U.S. increases the tariff to pressure the Chinese economy to obstruct the technology development of China. This argument can be strengthened by the argument of Dodwell (2018) who spell out that actual U.S. purpose of trade war is not targeting to the tariffs, aluminium, car, and steel, but the U.S. targeting to the China globalization strategy of Made in China 2025.
U.S. targeting to destroy the China strategy of Made in China 2025 to keep pressure the Chinese economy as a whole using the trade war through increases the tariff and U.S. try to decrease the level of Chinas goods and services export to a foreign country, U.S. also prohibited the company who doing business with U.S. to do business with China at the same time. These USs actions purposing to make the China economy power decreases and resulted in inadequate China to develop high-technological and Made in China 2025 failed. This case will impact the danger crisis and destabilization around the world, even though the real impact impossible to predict but it may generate the new worldwide economic crisis. Globalization may be preventing the large wars but also can provoke the cold war between two or more countries. The global economy related to the global supply and globalize production location, so the trade war does not only influences the economy of U.S. and China but non-U.S. and non-China can be hurt also especially for multi-national companies (MNCs).
2.4. China-U.S. Trade War and Investment Strategy
The trade war has impacted in a global economy, so the investor should make their strategy wisely. A China-U.S. trade war will destroy both sides, if China stop buys Airplane and soybeans from the U.S., 180,000 American people could be lost their jobs and also could lead to the loss of local jobs up top 10% (Jin, 2017). Unlike The U.S., China is in a good position to face the trade war result (Dollar, 2018). If GDP per capita of China increase and can reach a half of GDP per capita of US, it will be the disaster for the U.S. because GDP per capita times the high population number of China can make China reach twice of USs GDP. According to these perceptions, an investment banker could choose to invest their fund to China companies rather than U.S. companies or to invest to non-U.S. and non-China companies that unrelated to China and U.S. import-export business.