China, range of goods.The event took place

China,
the major driver of the global economy has shown tremendous growth in its
exports and building of its foreign currency reserves. The giant country(China)
summed an amount of 3.12 trillion of its total reserves in the year 2016,which
had been the lowest since the year 2011 but has remained the highest in
relation to the foreign currency reserves of any other country. China has
recently increased its foreign currency reserves from the year 2016 from 3.12
trillion US dollars to 3.14 trillion US dollars. Not only the reserves has
showed a growth but also the gold reserves has increased to USD 76.47 billion
at the end of December month from USD 75.83 billion at the end of November in
the year 2016. The reason behind this increased foreign currency and its gold
reserves can be clearly seen in its increased amount of goods exported from the
country to all the different parts of the world.

Its
been since the year 2007 where China has been the main source of imports of
Electronics, Clothing and Machinery. The major reason behind this high amount
of exports is China’s low cost of production. The US manufacturers ship the raw
materials from US to China and then China imports the finished goods back to
the US. The United Nation’s trade deficit with China was $347 billion in the
year 2016 which clearly shows how large are the US imports over its exports to
China. The US exports to China were only $116 billion whereas its imports were
$467 billion. In the year 2009, China has outpaced Canada and Mexico which
accounted for 14% and 11% of total imports with the US.And it’s since then that
China has become the major and the principal source of imports of US.     

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China
has become the trade juggernaut. The high export of goods to the US which has
resulted in the increase of the trade deficit between both the countries has
made the US president to think on its toes. The US president Donald Trump has
taken actions regarding the increase of imports from China by increasing the
import tariffs on a range of goods.The event took place on 22nd of
January,2018. Solar panels and Washing machines has been targeted and the
import tariffs imposed on them are 30% and 50% respectively with duties
declining to 15% on the fourth year for solar panels. For washing machines the
president has approved a combined tariffs and quotas for next three years. Trump
has imposed these tariffs to bring down the trade deficit by lowering imports
to be more in line with the exports and to safeguard the manufacturers of the US.
China and South Korea condemned the steps on the tariff imposition made and
called them as a “misuse of trade measures” and have suggested taking the
complaint to the World trade Organization (WTO), who settles the trade disputes
between the countries.

There
was a major impact on South Korea and China. The South Korean solar panel
makers and LG electronics, a domestic maker of appliances fell in Seoul and the
Samsung Electronics Company which had comparatively less deviation said that
the tariffs on washing machine were a great loss to the consumers and the
workers of the US. The Solar Energy Industries Association (SEIA), which
constitutes the installation companies, described the import tariff move as “a
loss for America” which will “create a crisis in a part of our economy that has
been thriving.” The association forecasts that billions of dollars of investment
in solar will be delayed or cancelled which will lead to the loss of around
23,000 jobs this year.

Another
major issue has been China’s currency policy. In the year 1994, China
deliberately kept its currency undervalued by pegging renminbi (RMB) to US
dollar and maintaining the same exchange rate for over a decade. In the year
2005, it ameliorates its currency policy by making its currency RMB exchange
rates adjustable. This resulted in almost 19% appreciation of its currency RMB
in the year 2009. Quite a lot believe that the policy made by the Chinese
Government has contributed to the vast US trade deficit with China by making
Chinese exports cheaper than imports and is highly responsible for job losses
in the US. The policy helped China in purchasing a large number of US
securities and making China the largest holder of the US Treasuries in the year
2008. Trump knows and he as well claims that China always undervalues its
currency by 15% to 40%,which was true in 2000 to increase its imports so he has
also asked China to do more to raise its currency so that the price of goods in
China becomes a bit expensive which will lower the amount of goods exported
from China to the US. According to the Liao Qun, the chief economist at China- the
increase in tariffs will impact the RMB and will put Chinese exports in a hard
situation which will in turn motivate the Central government to allow its
currency RMB to further weaken to offset export losses.

According
to the China Chamber of Commerce for Import and Export of Machinery and
Electronic products, India is one of the largest importers of Solar Panels from
China which accounts for almost 31%. The imposition of tariffs on solar panels
by the US has allowed India to take edge of this situation as they can take
advantage of possible lower prices as suppliers seek newer markets. The
Government of India should check on their duty to leverage the opportunity of
procuring cheap solar panel production. The fall in the market of solar panels
in the US has brought down the prices of the solar panels in India and this can
be a point where India could get solar panels at a very good rate. China’s
solar module manufacturing capacity is estimated to be 70 Giga-watt (GW) per
year and the major potential markets are US, India and China itself. The green
energy activity is mostly expected to slow down in the US, so China’s solar
equipment manufacturers may adopt a more competitive stroke on pricing to drive
demand. Most probably this will help India to add around 100GW of solar power
capacity by the year 2022.

As
there is low consumption of solar panel in the US, the price of oil will tend
to increase as oil is the major substitute of solar energy. The demand for oil
in the US will tend to increase because of the decrease in consumption of solar
energy which will further tend to increase the price of oil.

Therefore,
I would like to conclude by saying that from the view point of US, most of the
firms in the US are happy about the implementation of heavy tariffs on solar
panels and washing machines because it will help them to grow. China and South
Korea on the other hand are hard hit by the move taken by Donald Trump and they
have charged Trump of jeopardizing the multilateral trading system by taking
actions on complaints under the US law instead of through the World trade
Organization (WTO). Many of the Americans are also unhappy about the tariffs
because they believe to see a rise in the unemployment rate over the period.
From the view point of India, India will be benefitting from these tariffs as
they could negotiate from the Chinese solar manufacturers and get more of the
solar panels at a good rate. Lastly, the price of oil seems to rise as the
demand for oil in US rises as there will be low consumption of solar energy. Overall
I feel that the steps taken by the US president Donald Trump of imposing high tariffs
is not a fair one as it would create trade war between countries and can affect
relationships between them.