Video: Impact of US-China trade war in the Middle East

Thu 13 Jun 2019 11:51 AM GST
Just when we think the US-China trade war couldn't get worse, China's Xi Jinping would play his surprise "trump" card out of the blue or US President Donald Trump would put out an offensive tweet that would further escalate the war.

Unfortunately nations and industries across the world are getting affected by the war between the US and China given their economic significance and scale. (We saw that with the ongoing Huawei fiasco)

ABTV's Shruthi Nair breaks down the US-China trade war for you and helps you understand the impact it has on the GCC.

I’m going to go back to the US general elections of 2016 where Trump had vowed to cancel trade deals and go on an offensive against Chinese economic practices. That’s when it all started.

The very next year, in 2017, The US launched an investigation into China’s trade policies. Following this, there were trade barriers and heavy taxes worth billions of dollars imposed on Chinese goods.

Why?

1. To penalise China for their controversial practices like forcing foreign businesses to hand over their most prized technology to Chinese companies — many of which are state-owned — in exchange for access to their market.

2. These tariffs would make US-made products cheaper than imported ones, and encourage consumers to buy American.

3. Washington also demanded that China reduce its $375 billion trade deficit with the US, and introduce “verifiable measures” for protection of Intellectual Property Rights, technology transfer, and more access to American goods in Chinese markets.

What kind of tariffs are we talking about?

The Trade war officially began in 2018 when the Trump administration followed through with its threat to impose tariffs on $34 billion worth of Chinese product. The goods marked for tariffs also faced a punishing 25 percent border tax when they’re imported into the US.

China responded by imposing 25 percent tariffs on $34 billion worth of US goods, including soybeans, automobiles, and lobsters.

Last year, the US imposed three rounds of tariffs on more than $250bn worth of Chinese goods.

Beijing hit back with tariffs on $110bn of US goods, accusing the US of starting "the largest trade war in economic history".

Doesn’t end there.

The US raised tariffs on $200bn of Chinese products to 25% from 10% last month. The US has also started the process for hitting an additional $300bn of Chinese goods with tariffs.

Now let’s look at the impact all of this has on this region

To begin with, the stock market takes a hit every time there is a new round of tariffs imposed.

Last month, the Dubai Financial Market lost nearly four per cent to close at 2,525; while the Abu Dhabi Securities Exchange nosedived 3.3 per cent to 4,929. Saudi Arabia's Tadawul lost 3.55 per cent, while the Bahrain Stock Exchange fell 0.81 per cent and Boursa Kuwait dropped 1.37 per cent.

Trade and integrated supply chains are important to demand for petroleum, which is the premier transportation fuel. Less trade means less demand for oil, which will hit GCC producers such as Saudi Arabia, UAE and Kuwait.

Several of the GCC countries have signed up to Beijing’s ambitious Belt and Road plan. The initiative wants to bring back to life the trading routes of the ancient Silk Road. Oman and the UAE, especially, contribute to and benefit from the scheme both as logistics — and manufacturing — hubs.

This could be drastically affected if the situation worsens.

And as you know, Huawei has been caught in the tug of war between the US and China. This also means that Intel Qualcomm and Broadcom will lose one of their most important clients once the three months’ grace period has expired.

Since some companies in the US have also started feeling the pinch The UAE's Economy Minister Sultan bin Saeed Al Mansoori last year had said the Emirates hopes to resolve the tariff issues with the Trump administration in 2019.

This is 2019 and things just seem to be getting worse. We will bring you updates on this story so dn’t fo0rget to subscribe and comment below.

(Source: Arabianbusiness.com YouTube channel)