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US and China gear up for round 2 of trade war: Could this benefit India?

The US and China have imposed tariffs on goods worth billions of dollars as a reaction to the breakdown of trade discussions between the two.

After the US raised tariffs on Chinese goods worth $200 billion, China said that it will raise tariffs on $60 billion American goods in retaliation. In response, both Asian markets and Wall Street fell sharply as the two countries found themselves embroiled in yet another round of trade war.

On May 5, US President Donald Trump announced a 25% hike in duties on $200 billion Chinese products, stating there was incremental progress on trade discussions between the two countries, despite this administration claiming that the talks were going well, reports CNBC. 

Trump took to Twitter to announce that he will be raising the tariffs by over half its original rate.

He said that China has already been paying the US tariffs of 25% on $50 billion dollars worth of high-technology goods, but only 10% on $200 billion worth of other products like meat, vegetables, tea and coffee, and apparel.

“The 10% will go up to 25% on Friday. 325 Billion Dollars of additional goods sent to us by China remain untaxed, but will be shortly at a rate of 25%”, he tweeted.

How did the US-China trade war escalate? 

Over the years, the US began to take issue with China’s trade surplus with the US, claiming it was because of China’s unfair trade practices.

In 2018, the US imposed tariffs on $250 billion worth of Chinese goods of a total $539 billion imports, reports the BBC. China then retaliated with tariffs on $110 billion of American goods out of a total $120 imports from the US.

In December 2018, US and China called a truce to their trade war and attempted to renegotiate a deal. CNBC explains that the two main points of contention in the trade talks are intellectual property rights and forced technology transfers.

The Special 301 report says that trading partners like India and China who do not “adequately or effectively protect and enforce intellectual property rights or otherwise deny market access to U.S. innovators” have been put on the watchlist.

In terms of forced technology, if a foreign company wants to enter the Chinese market, it must surrender its technology to the Chinese government in the form of a joint venture, explains the South China Morning Post.

The USTR has said that this forced technology transfer is “unreasonable or discriminatory” and creates a burden on US commerce. 

However, it seems that Trump grew frustrated at the lack of progress and imposed tariffs on the Chinese to pressure them-a move that China has also now made.

CNN reports that China has also launched a media campaign against the US through its state-controlled media to not only dredge negativity against US’ trade tactics but also confidence in its own economy.

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