Rolling into its 18-month, the trade war between the U.S. and China remains unresolved, creating uncertainties in the world's two largest economies and throwing the global economy off balance.
The trade war between the two economic giants has spread into industries such as agriculture, technology, intellectual property rights, energy and the automotive sector. It has also caused losses in major stock markets around the world and resulted in huge fluctuations in commodity prices such as steel, aluminum and crude oil.
The biggest reason behind the pessimistic global economic outlook is because the trade war is still unresolved after one and a half years, according to the world's leading authorities.
The International Monetary Fund (IMF) lowered its global economic growth forecast in July by 0.1% for 2019 and now expects the world economy to expand by 3.2% this year.
The World Trade Organization (WTO) was not so modest in its revision, announcing on Oct. 1 that its has lowered its global trade growth estimate for 2019 to 1.2% from its previous forecast of 2.6%, and decreased its expectation for 2020 to 2.7% down from its previous estimate of 3.0%.
Over the last 18 months, the U.S. has imposed tariffs on $550 billion worth of Chinese imports, while China has reciprocated by implementing tariffs on $185 billion worth of imports from the U.S.
- US trade deficit grows
While running for the presidency in the 2016 elections, two of U.S. President Donald Trump's promises were to lower his country's trade deficit and renegotiate international trade deals that the U.S. is a party to.
However, the trade war with Beijing caused an increase in the U.S. trade deficit, according to the U.S. Census Bureau data.
The U.S.' trade deficit with China was recorded as $347 billion in 2016. This rose to $347 billion in 2017 and climbed to $420 billion in 2018.
Last year, the U.S.' largest imports from China were computers costing $77 billion, cellphones amounting to $70 billion and apparel and footwear worth $54 billion. In 2018, China's largest imports from the U.S. were $16 billion worth of commercial aircraft, soybeans at a cost of $12 billion, and automobiles worth $10 billion.
- Operations against Huawei
The U.S.-China trade war took another turn after Chinese communications giant Huawei's Chief Financial Officer (CFO) Meng Wanzhou, daughter of the founder and Chief Executive Officer (CEO) Ren Zhengfei, was arrested on Dec. 1, 2018, in Canada for allegedly breaching U.S. sanctions on Iran and for financial defraud.
In May 2019, the U.S. Commerce Department put restrictions on American companies from trading with Huawei without a U.S. government license. Several American companies, including tech giants Google, Intel, Microsoft and Qualcomm, immediately halted their business with Huawei.
Software giant Google has also put an end to providing Android operating system updates for future Huawei mobile devices, which forced the Chinese telecommunications national champion to develop its own operating system and applications.
- Optimistic outlook for trade deal
The outlook of the trade war between the U.S. and China turned positive after both countries gave some concessions last week before the 13th round of trade talks kicked off on Thursday in Washington, D.C.
China has provided certain exemptions from soy, pork and some agricultural goods that it imports from the U.S., while Trump said he delayed increasing the rate of tariffs on $250 billion worth of Chinese imports until Oct. 15.
"Big day of negotiations with China. They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House," Trump said via Twitter on Thursday.
The president also announced on Thursday that the 13th round of trade talks with the Chinese delegation is going "really well" in Washington, adding, "We had a very, very good negotiation with China."
Both major and emerging economies are now focused on the outcome of a trade deal. Even the announcement of a preliminary trade agreement would restore confidence in stock markets, which in turn would generate positivity for the global economic outlook.
By Ovunc Kutlu