A Clash of Titans : Underlying Causes,
Chronologies and Impacts of the Current US
Bachelor Project submitted for the degree of
Bachelor of Science HES in International Business Management by
Bachelor Project Mentor:
Laurent MATILE, Lecturer
Geneva, August 21st, 2020
Haute école de gestion de Genève (HEG-GE) International Business Management
This report is submitted as part of the final examination requirements of the Haute école de gestion de Genève, for the Bachelor of Science HES-SO in International Business Management. The use of any conclusions or recommendations made in or based upon this report, with no prejudice to their value, engages the responsibility neither of the author, nor the author’s mentor, nor the jury members nor the HEG or any of its employees.
I would like to particularly thank my mentor, Mr Laurent Matile, who has enabled me to deepen my thinking on the subject through his kind advice, pertinent questions, in-depth discussions and attention to detail. His expertise in the field of international trade has been of great assistance in helping me understand the legal and regulatory specificities of the global trade environment. His attentive follow-up, time and availability during the whole process were highly appreciated, especially in the context of the Covid-19 outbreak.
Sophie’s unconditional support and constant cheer-up, whether remotely or in-person during this year, were very previous. I would like to thank her for her incredible kindness, patience and personality, as well as for these four years of the HEG: without her, the experience would have been much duller and more stressful. The presence of Jenny and her encouragements during the last weeks of redaction this summer were also precious. My thanks also go to Hanna for the time taken to proofread my work carefully, despite the short deadlines. Her advice, recommendations and encouragement were particularly appreciated. Yann's support has also been valuable, especially for his insights and question during our debates or discussions.
Tremendous gratitude also to my family, my parents and sister Mélanie, who supported me both financially and morally during these four years of university without taking offense of my lack of availability and time.
Finally, I would like to thank, to a certain extent, the Covid-19 pandemic, without whom the second semester of my Erasmus exchange at the International School of Management in Germany would have been much more exciting and consequently, my bachelor thesis, much shorter and less exhaustive.
The election of Donald J. Trump at the presidency of the world-biggest economy has been the beginning of important changes in the international order and more specifically in the rules-based trading system. Under his leadership, the US has imposed, in successful waves, tariffs and trade-restrictive measures on imported goods coming from most of its trading partners and this in parallel of the WTO rules-based framework, despite the country being a founding member of the international organization. Furthermore, under President Trump’s administration, the persistent US attempts to paralyze the WTO Dispute Settlement Body were finally successful. The supreme court when it comes to trade is unable to issue final and binding verdicts since December 2019, depriving the organization of its fundamental function as arbitrator for trade conflicts between member countries. The action plunged the WTO and global multilateral system into an existential crisis. Several reasons were given to justify the imposition of tariffs targeting mainly the second- and third-biggest economic powers in the world, namely the EU and China. Unfair trade practices concerning Intellectual Property Rights, Chinese non-market economic features and violations of China’s protocol of accession to the WTO, systematic trade deficit with the EU and China and project of future tax laws were deemed as hurting unreasonably US commerce and companies. Unilateral implementation of tariffs under specific US trade laws, whether on steel and aluminium, LRW, solar panels were seen as necessary so as to protect US industries, especially in the manufacturing sector and blue-collar workers’ jobs, an unwavering electoral base of President Trump.
However, due to the current structure of the global economy, where countries are interconnected and interdependent due to the increasing importance of trade in intermediate goods as well as the rise of GVCs in the production process, has raised the question whether the US were actually shooting themselves in the foot. Tariffs seemed to raise the prices of parts and components that US companies use in their production, thus increasing input costs and undermining overall cost-competitiveness.
While acknowledging that China’s accession to the WTO in 2001 has raised challenges, notably on how to address the country’s state-led policies and practices such as SOEs, WTO members and US closest trading partners, the EU ahead, have questioned the appropriateness as well as the relevance of the measures taken by the US. The latter are perceived as having undermined the global trading system, increased uncertainty, provoked a decrease in FDI and potentially plummeted the economic growth at the same time, all for the pursuit of domestic objectives serving US interests uniquely.
Table of Contents
A Clash of Titans : Underlying Causes, Chronologies and Impacts of the
Current US Trade Wars ... 1
Disclaimer ... ii
Acknowledgements ... iii
Table of Contents ... v
List of Tables ... ix
List of Figures ... ix
List of Appendixes ... x
List of Abbreviations ... x
Introduction ... 1
Literature review ... 3
Methodology ... 7
Neutrality of sources ... 7
Analysis ... 9
China’s rise: from economic to global power ... 9
Influence over international organizations ... 10
Technology and telecommunications ... 11
OFDI and Monroe Doctrine ... 14
“America First” Agenda & multilateral trade system ... 15
Trade flows between the three biggest economic powers ... 17
Top trading partners ... 19
The US ... 126.96.36.199 Exports ... 19 188.8.131.52 Imports ... 20
The EU ... 184.108.40.206 Exports ... 21 220.127.116.11 Imports ... 21
China ... 18.104.22.168 Exports ... 22 22.214.171.124 Imports ... 22
Trade balances ... 22
Main goods traded in 2017 ... 23
Manufacture ... 24
Fuel and mining products ... 24
Agricultural products ... 25
Trade in goods according to the SNA framework ... 25
Intermediate goods ... 26
Capital goods ... 27
Consumption goods ... 27
GVCs ... 28
TiVA trade profiles and participation in GVC ... 31
126.96.36.199 Germany (as representative of the EU’s position) ... 32
188.8.131.52 China ... 32
184.108.40.206 The US ... 33
The WTO and its role in international trade relations ... 9
Fundamentals of the organization ... 34
Dispute settlement system ... 36
Arbitrage process ... 36
Current situation ... 37
US criticisms of the WTO and actions undertaken ... 39
Protective measures included in the WTO framework ... 42
Anti-dumping actions ... 42
Subsidies and countervailing measures ... 43
Safeguards measures ... 44
220.127.116.11 Airbus dispute: legal countervailing measures in the WTO framework 45
US Unilateral decisions ... 47
US Trade laws ... 47
18.104.22.168 Section 232 of the Trade Expansion Act of 1962 ... 48
22.214.171.124 Section 201 of the Trade Act of 1974 ... 49
126.96.36.199 Section 301 of the Trade Act of 1974 ... 49
Underlying reasons of the trade wars ... 51
China ... 51
Alleged violations of WTO obligations ... 53
188.8.131.52 Forced technology transfer – theft of US IP ... 53
184.108.40.206 Subsidies and quotas ... 55
220.127.116.11.1 Agricultural subsidies ... 57
18.104.22.168.2 Industrial subsidies ... 58
22.214.171.124 Market access’ restrictions ... 61
China’s developing status in the WTO ... 62
Accusation of Renminbi manipulation ... 64
Trade deficit in goods ... 66
EU ... 68
EU support to multilateralism ... 68
Trade deficit in goods ... 68
Non-Tariff Measures in agriculture ... 69
Asymmetrical tax rate on imports ... 70
Digital-services tax in France ... 71
Boeing-Airbus Disputes in the WTO ... 73
Chronology ... 75
Section 232 of the Trade Expansion Act of 1962: National
Security ... 75
Steel & Aluminum ... 75
126.96.36.199 Importance of steel and aluminum for the US ... 76
188.8.131.52 Global steel and aluminum production & US position ... 76
184.108.40.206 Primary sources of US imports of steel and aluminum ... 77
220.127.116.11 Existing protections ante-2018 for both sectors ... 78
Exemptions from tariffs and negotiations ... 78
Trading partners’ reactions ... 79
18.104.22.168 China’s answer ... 79
22.214.171.124 EU’s three-pronged answer ... 80
126.96.36.199.1 WTO proceeding ... 80
188.8.131.52.2 Prevention of steel and aluminum imports’ surge ... 80
184.108.40.206.3 Safeguard measures ... 80
220.127.116.11 Canada’s and Mexico’ measures ... 81
18.104.22.168 US reaction ... 81
Section 201 of the Trade Act of 1974 ... 83
Solar panels & modules ... 83
22.214.171.124 US position in the solar industry ... 84
Washing machines and parts ... 85
126.96.36.199 Former measures implemented in the LRW’s sector and consequences ... 86
Section 301 of the Trade Act of 1974 ... 88
China’s Trade Practices in IPR ... 88
188.8.131.52 Different stages ... 89
184.108.40.206.1 First wave of tariffs: Stage 1 and Stage 2 ... 89
220.127.116.11.2 Stage 3 ... 90
18.104.22.168.3 Temporary Truce ... 90
22.214.171.124.4 Resumption of the trade conflict’s escalation ... 91
Stage 4 and Stage 5 ... 92
126.96.36.199.6 De-escalation ... 94
188.8.131.52.7 State of the affairs before the Phase-One Deal ... 95
184.108.40.206.8 Phase-One Deal ... 96
220.127.116.11.8.1 Content of the Phase-One agreement ... 97
18.104.22.168 WTO cases ... 108
22.214.171.124 US’ legal actions ... 108
126.96.36.199 China’s legal actions ... 108
Effects of the trade wars on US agriculture and manufacturing sectors
Agriculture ... 113
Impacts on Exports ... 113
188.8.131.52 Trade redirection ... 114
Soybeans ... 115
Impact of tariffs on farm income ... 116
184.108.40.206 Section 232 tariffs ... 116
220.127.116.11 Farms’ income ... 116
18.104.22.168 Farm debt and Bankruptcies ... 117
Manufacturing ... 118
Overall trend & tendency ... 119
US ISM Manufacturing PMI ... 121
Employment level ... 123
Washing machines ... 124
Solar industry ... 125
Steel and aluminum ... 126
Conclusion ... 127
Bibliography ... 138
Appendix 1 – Correspondence between the SNA classes of goods and the
BEC classification ... 182
Appendix 2 – Main trading partners ... 183
Appendix 3 – TiVA and GVCs - Statistical profiles ... 184
Appendix 4 - US Cases against China in the WTO ... 185
Appendix 5 - Section 232’s investigation on imports of automobiles and
automotive parts ... 187
Appendix 6 - French Digital tax & Section 301 investigation ... 187
List of Tables
Table 1 – Neutrality of Media 1 ... 8
Table 2 – Trade flows' Overview ... 18
Table 3 – US Trade Partners (2017) ... 19
Table 4 – EU Trade Partners (2017) ... 20
Table 5 – China Trade Partners (2017) ... 21
Table 6 – Trade Balances for Merchandise (2017) ... 22
Table 7 – Main categories of goods traded ... 24
Table 8 – SNA Framework trade in goods ... 26
Table 9 – US investigations ... 51
Table 10 – Top sources of US steel imports ... 77
Table 11 – Top sources of US aluminum imports ... 77
Table 12 – Steel and Aluminum dispute – Key events ... 82
Table 13 – Solar panels and cells dispute – Key events ... 85
Table 14 – Washing machines dispute – Key events ... 87
Table 15 – Types of goods targeted in the different tariff stages ... 96
Table 16 – Phase-One Deal – China’s purchasing targets ... 99
Table 17 – Section 301's WTO cases ... 109
Table 18 – Section 301 Summary – tariffs effectively implemented by both parties
Table 19 – Section 301's tariffs – Full chronology ... 110
List of Figures
Figure 1 – Production hubs for trade in parts and components ... 30
Figure 2 – US Chapter 12 Farm bankruptcies by region (2019) ... 118
List of Appendixes
Appendix 1 – Correspondence between the SNA classes of goods and the BEC
classification ... 182
Appendix 2 – Main trading partners ... 183
Appendix 3 – TiVA and GVCs - Statistical profiles ... 184
Appendix 4 - US Cases against China in the WTO ... 185
Appendix 5 - Section 232’s investigation on imports of automobiles and
automotive parts ... 187
Appendix 6 - French Digital tax & Section 301 investigation ... 187
Appendix 7 - Airbus WTO & Section 301 Investigations ... 188
List of Abbreviations
AGA Agreement on Agriculture
BEC Broad Economic Categories
BEPS Base Erosion and Profit Shifting
BRI Belt and Road Initiative
CGTN China Global Television Network
DSB Dispute Settlement Body
DSU Dispute Settlement Understanding
EU European Union
FDI Foreign Direct Investment
ISM Institute for Supply Management
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GPA Government Procurement Agreement
GVC Global Value Chain
GSP Generalized System of Preferences
LDC Least-Developed Countries
LRW Large Residential Washers
MBFC Media Bias/Fact Check
MFN Most-Favored Nation
NT National Treatment
NTM Non-Tariff Measures
OECD Organization for Economic Co-operation and
PIIE Peterson Institute for International Economics
PMI Purchasing Managers Index
R&D Research and Development
SITC Standard International Trade Classification system
SOEs State-Owned Enterprises
UAE United Arab Emirates
UN United Nations
UNCTAD United Nations Conference on Trade and Development
UNESCO United Nations Educational, Scientific and Cultural
UNHRC United Nations Human Rights Council
US United States
USITC United States International Trade Commission
USTR United States Trade Representative
SCM Agreement Subsidies and Countervailing Measures Agreement
SG Agreement Safeguard Agreement
SEIA Solar Energy Industries Association
SPS Sanitary and Phyto-Sanitary
TiVA Trade in Value-Added
TMT Thousand Metric Tonne
TPP Trans-Pacific Partnership
TRQ Tariff-Rate Quota
WHO World Health Organization
WTO World Trade Organization
The election of Donald J. Trump on November 8th, 2016 as the 45th president of the United States (US) took the world by surprise in reason of his unconventional political profile. His departure from the traditional political and diplomatic stance of the US as well as the actions implemented under his leadership have caused trade and business uncertainty to skyrocket to reach an unprecedented level since 1996.
Unfortunately, certainty and certitude are considered as necessary prerequisites for business confidence, job creation, decision-making process and investment decisions of companies, which are necessary fuel for global economic activity and growth. The current global trading system is almost relying entirely on the existing legal framework and rulebook negotiated within the World Trade Organization (WTO), which includes 165 member countries and account for 98 per cent of international trade. However, this structure has been disrupted and shaken by the unilateral decisions imposed by the US since 2018, to the point the international organization has been rendered incapable of fulfilling its function of arbitrator in trade disputes between its members, making the trading environment even more unstable and unpredictable.
While the US actions have been a significant factor in the current turmoil, one cannot overlook that global economy and international trade are, by definition, subject to a number of factors influencing their courses and developments. Disruptions and instability in the last few years were also coming from different sources, which can be classified in the following categories:
• Political: the Brexit or the unilateral decision of the United-Kingdom to exit the European-Union has raised questions concerning the future of the economic relationship between the island and the EU composed by now 27 countries after the end of the transition period initiated at the beginning of 2020.
• Safety: Specific sectors faced crises in the last few years, such as the manufacturing industries in the US following the Boeing 737 Max Jet production halt resulting from the two fatal crashes in 2018 and 2019 as well as the EU, more specifically in Germany with the Volkswagen emissions scandal in 2015.
• Health: More recently, the Covid-19 outbreak has forced companies to halt entire chains of production, caused governments to put entire populations in lockdown and tested the cooperation between countries and added further strain on the multilateral system, since the emergence of the virus in December 2019. The
countries are now facing almost unprecedented levels of unemployment, and a global recession of a much larger magnitude than the 2009 financial crisis is forecasted for the two next years.
At the basis of this work is a real questioning concerning the potential butterfly effect resulting from the globalization process as well as from increasing interdependences and interconnectedness of the nations with each other. In consequence, this bachelor thesis aims at offering a reading grid to understand how “one small change in the initial condition of a system has the potential to cascade out of control [and to provoke] large scale of alteration of events” (Wolchover 2011) with respect to the risk of multilateral system’s fraying and collapsing and decoupling of the Sino-American economies following the election of President Trump in 2016.
This bachelor thesis will concentrate on the following research objectives: • To understand the US and China’s rivalry on the international scene.
• To analyze the trade flows linking the three biggest economies, so as to assess to which extent they are economically dependent on each other, whether it is due to trade flows, types of goods exchanged or links through global chains of production.
• To understand the role of the WTO framework in the trade relationships between the countries and the links with the US trade laws that were used to implement trade-restrictive measures in the trade wars as well as to find out why the very organization that oversees to the rules and framework of international trade seemed to be powerless to counter the rise of protectionism in US politics. • To examine the course of events in the trade wars since 2017 that led to the
imposition of tariffs on almost $500 billion of US imports.
• To assess the consequences of tariff implementation on specific sectors that were supposed to be safeguarded by the protective measures.
The report is structured in five main chapters so as to reach the research objectives. Consequent to the introductory part, an overview of the main Sino-American battlefields is first presented, followed by the trading and global value chains’ linkages connecting the three biggest world economies, namely the US, the EU and China.
The second part will give an overview of the WTO and Dispute Settlement Body (DSB) ’s roles in the global multilateral trade system. So as to complement the legal approach, a parallel between the US and WTO laws will be included in this section. The third part
will present the reasons and causes given by the US in order to justify the tariff implementation outside the WTO system against various trade partners. A chronology of the different trade wars will then be offered in section four for the reader to understand the sequence of events since 2017 up to this day. Finally, the consequences on the agricultural and manufacturing sectors, two industries that were at the heart of the duties’ enactment will be presented in the last and final part.
2 Literature review
The structure of the global economy has considerably evolved during the last decades, mainly due to the acceleration of the globalization process. According to Steger, the concept of globalization can be divided into four overlapping and interdependent dimensions of influence. Those are, namely, economic, political, cultural and ideological, thus “a set of social processes that are thought to transform our present social condition into one of globality” (2003, p. 8). The logical consequences resulting from this course of events is an increasing interdependence and interconnection between the countries and regions, a phenomenon that was greatly facilitated by, among others, the “lowering of communication and transportation costs” (Stiglitz 2006, p. 4), the emergence of new technologies as well as the reduction of trade barriers.
Trade and cross-border investments that flow between the members of this new global economic system have been an effective way to increase “economic growth, development, and poverty diminution” (Gujrati 2013, p. 2). For Stiglitz, hopes were high concerning the potential benefits of globalization, with open markets and borders as well as increased foreign investment resulting in raised living standards (2006, p. 4). From a trading perspective, the global economic integration has matched, if not exceeded, the expectations. According to the World Bank, the export of goods and services amounted to almost 30 per cent of the world Gross Domestic Product (GDP) in 2017 compared to 12 per cent in 1960 (2019). World trade has increased steadily over the past 20 years, with an average growth of 6 per cent per year, “twice the world output” (Gujrati 2013). Some countries and regions have achieved dominant economic positions in the global trading system, “the top five [merchandise] traders accounting for more than one-third of world trade in 2017” (WTO 2018, p. 68)1, with 38% of the world exports and imports.
However, various critical voices have expressed caution regarding the adverse effects of globalization, especially its impacts on regional and sectoral labor markets in the form
of “increased unemployment, lowered factor of participation, and reduced wages” (Autor, Dorn, Hanson 2013; Scott, Kimball 2014).
Economic integration in the global trade system has reached an unprecedented level with the proliferation of Global Value Chains (GVCs). The expansion of fragmented production process of goods and services across national borders in the last two decades has required the development of a complementary approach to gain a better understanding of the modern dynamics in global trade. Indeed, in 2018 “more than two-thirds of world trade occurs through GVCs” (World Bank, WTO 2019)2. One of the implications is that
countries economically integrated into these international production chains are trading mostly parts and components rather than finished products. Therefore, they rely heavily on foreign imports and exports for their domestic production (Lamy 2013). Since 2000, “intermediate goods have comprised 50 per cent of exports and over 60 per cent of imports” (World Bank, WTO 2019, p. 41) in Asia. The rising importance of GVC’s and the “Made-in-the- World” (Lamy 2013, p. 17) production processes had an important policy implication:
“changes in trade policy [in one country] can have broad and unanticipated effects. The unilateral imposition of trade protection on exports from a partner country can have a significant impact on third countries when trade is carried out through
GVCs.” (World Bank, WTO 2019, p. 41)
The emergence of these deeply interdependent and complementary economies increased more than ever the need for a safe, predictable and stable environment, conducive to investment and trade for the countries and companies. Indeed, negative correlation between uncertainty and total investments from firms on both short and long term has been proven by several researchers, such as Kang, Lee, Ratti 2014; Abberger, Siegenthaler, Sturm 2016; Chen, Lee, Zeng 2019.
The WTO’s role since its creation in 1995 was precisely to carry on the mission of the General Agreement on Tariffs and Trade (GATT) while bridging gaps in the former organization’s functioning. Among other elements, the following functions are, for Stanton, at the heart of the WTO’s vocation: to deal with the rules of global trade in order to “provide assurance and stability” (WTO 2018)3 for consumers and producer, to reduce
trade-related barriers between the countries, to open new markets as well as to facilitate international trade of goods and services (Stanton 2013). The international organization
2 Technological innovation, supply chain trade, and workers in a globalized world: global value chains
development report 2019
aims at offering a negotiation table for its member governments to reach and ratify binding trade agreements, as well as to settle disputes “through a neutral procedure based on an agreed legal foundation” (WTO 2015)4. Through the established set of rules
such as Most Favored Nation (MFN)5 and National Treatment (NT)6, the WTO had been
able to safeguard the multilateral trade system and strived to ensure transparency, equality and predictability for its 164 members. The DSB, described as the “crown jewel” (Bhatia 2018) of the international organization, has been attacked regularly by several WTO members and especially by the United-States’ governments since the Bush presidency in 2001 (Wiseman, Keaten 2019). The appellate body is accused of “overstep[ping] its mandate” (Fiorini, Hoekman, Mavroidis, Saluste, Wolfe 2019) as well as “taking too long to resolve [the cases] and being ill-equipped to deal with the Chinese economy’s unconventional structure” (Wiseman, Keaten 2019).
“China’s rapid market integration and its accession to the WTO in 2001” (Autor 2018) after 15 years of negotiation had had numerous consequences on the world welfare. These impacts, colloquially known as “China Shock”, have allowed greater access to the Chinese market for WTO’s trade partners and a rise in cheap Chinese exports, especially in manufacturing, to the United-States and Europe (Boden 2012). However, China’s adhesion has also brought additional challenges to the multilateral system due to the structure of its economy, as it combines characteristics of “both market economy and non-market economy (NME) […]” (Li, Tu 2018, p. 5). The growing Chinese economic and political influence on the global governance’s institutions has weakened US’ and developed countries’ domination and a “power shift toward China and other developing economies” (Li, Tu 2018, p. 6) has been observed with the emergence of multipolar world order (Duggan, Naarajärvi 2015; Kapustina, Lipkova, Silin, Drevalev 2019).
While acknowledging that “economic distress due to enhanced import competition” (2019) has played a part in President Trump’s election, Noland’s researches have linked the voting results directly “with voter perceptions of US global dominance […]” (2019,
4 Understanding the WTO
5 The Most Favored Nation or MFN status is one of the founding principles of the WTO. It ensures that all
countries are treated equally and that no discrimination occurs between their trading partners. If a country wants to grant another WTO member a special treatment, the same preferential treatment will have to be given to all other WTO nations. Exceptions to this rule do exist but only under strict conditions, such as free trade agreement within a group of countries or imposition of trade restrictions on specific countries concerning “products that are considered to be traded unfairly.”(WTO 2015a, pp. 12–13)
6 The National Treatment (NT) rule ensures that imported and locally-produced goods are treated equally
p. 5). For some other authors, US voters’ concerns over the domestic economy, employment and the role of international trade in job losses were the main factors in Trump’s victory (Blendon, Casey, Benson 2017). Protectionist policies adopted since the beginning of his term of office in 2016 “departed from a broad US consensus supporting open international trade policies for three generations” (Noland 2019, p. 2).
The trade wars currently opposing the US to its main economic partners, mainly China and the European-Union (EU), are the most visible signs of this paradigm shift. The enactment of “several waves of tariff increases on specific products and countries” (Fajgelbaum, Goldberg, Kennedy, Khandelwal 2019, p. 3) beginning 2018 by the President Trump’s administration under the pretext of national security prompted the targeted trade partners to engage in a tit-for-tat spiral of retaliatory tariffs.
President Trump’s assumption that “trade wars are good, and easy to win” (2018) has been challenged and brought into doubt by global economic history as well as by most of the authors studying and writing on the matter. The latter tend to share a unanimous opinion concerning the outcomes of such economic conflicts: no parties come out as a winner from raising trade barriers, import protection or the implementation of tariffs or quotas (Jackson, Shepoylo 2018; Pretty Bhalla, Nazneen 2020). For Kapustina et al.,
“no trade war has winners, but every trade war recognizes three losers: both trade partners and the global decline in trade, leading to a slowdown in the global
economic growth. (2019, p. 2)
Due to the dominant role and position of the US in the global economy, any changes of its economic policies “have effects far beyond its shores” (Kose, Lakatos, Ohnsorge, Stocker 2017, p. 2) through different channels, such as trade, finance, commodity market as well as the synchronization of business cycles among advanced economies (2017, p. 11). Therefore, the disruptive trade approach currently taken by the US has already impacted negatively global growth, trade and investment, as
“increased uncertainty driven by […] ambiguity about the direction and scope of policies could discourage investors in the [country] and elsewhere that base their decisions about long-term investments on stable financing conditions and
predictable policies.” (Kose, Lakatos, Ohnsorge, Stocker 2017, p. 19)
To conclude, the “America First” agenda pursued by President Trump’s administration has opened a breach in the rules of global trade and brought unsettling time for trade and investment flows across the world.
The approaches selected so as to address the questions raised by the issues are solely based on qualitative research methods. In order to apprehend the complexity of the subject, secondary data has been selected, collected, compared and compiled in order to offer an extensive understanding of the situation. Existing literature, analysis and researches on world trade’s development, the WTO framework, economic and political relationships between the US and its partners, trade wars and US politics also serve as primary sources. However, prospective analysis uniquely based on models were used with caution: the author noticed that results forecasted by such simulation were not able to take into account the rapid evolution of the measures implemented by the different parties involved in the trade conflicts.
Moreover, press articles from renowned newspapers were used extensively as data sources due to the topicality of the subject.
Concerning the section on the economic links between the different trading partners, the data for 2017 trade flows’ analysis were retrieved from the official annual reports of the WTO, in order to present a global picture as objective as possible. As the data stated on the countries’ official reports may be dissimilar due the use of different accounting methods for trade flows, it was deemed important by the author to base this part of the work on a serious and independent organization that uses the same approach for all members when measuring and aggregating trade flows.
Regarding trade in goods according to the System of National Account framework, the UN Comtrade database was used to retrieve the data concerning merchandise trade according to the Broad Economic Categories for 2017. The seven BEC categories were then aggregated by the author’s care following the BEC4 guideline provided by the UN Statistical Commission so as to obtain the final three SNA classes. Appendix 1 provides an overview of the correspondence between the two frameworks.
Neutrality of sources
As mentioned beforehand, this subject is highly topical, and newspaper articles have been an essential source of information and data for this research. However, one cannot overlook the potential unintended bias from journalists and authors when covering a subject with so many linkages to politics. This aspect seems to be of particular importance in the current “fake news” environment and considering the tendencies of
President Trump at dismissing any media coverage that does not fit his personal narrative.
So as to minimize the possibility of partisan politics of sources, a media bias analysis of the primary sources has been performed through the framework created by the independent organization Media Bias/Fact Check (MBFC). To ensure the reliability of the results, the latter were checked once again through the lens of AllSides Media Bias Ratings. This website aims at providing a broad news cover from all the political spectrum and medias bias of the existing media outlets. No important differences in the media bias ranking were found between both frameworks after research.
The outcome of the analysis is summarized in the following table. Table 1
–Neutrality of Media 1
Name of the media Rating Factual reporting
ABC News Left-centre bias High
BBC Left-centre bias High
Bloomberg L.P Left-centre bias Medium-High
Business Insider Left-centre bias High
CGTN Left-Center Mixed
Financial Times Least biased High
Forbes Right-centre bias Mostly factual
Foreign Affairs Least biased High
New York Times Left-centre bias High
Reuters Least biased Very High
The Atlantic Left-centre bias High
The Balance Least biased High
The Conversation Least biased High
Washington Post Left-centre bias High
Bloomberg News has been used extensively throughout this bachelor thesis for several reasons, one being the reputation of the newspaper as well as the far-reaching and thorough covering of the trade wars through a daily newsletter called “Terms of Trade.” The rating “Medium-High” in reporting was primarily due to the lack of cover on Michael Bloomberg, a former candidate at the United States presidency as Democratic candidate and majority owner of the parent company Bloomberg LP (Huitsing 2019). As the political campaign lasted only four months, starting on November 24th, 2019 and suspended on
March 4th, 2020, the conflict of interest was short-lived and is unlikely to have had a significant impact on the cover of the trade wars by the newspaper.
The China Global Television Network (CGTN) is referred by both frameworks as a questionable source of information and tend to promote pro-state propaganda as well to show heavy censorship (Media Bias/Fact Check 2020). However, the source was consulted on a regular basis by the author while writing, so as to be aware of the difference of narratives between both countries. Nevertheless, the website has been used as a reference only when other sources were corroborating the reported events.
As most of the sources have been considered to show some left-centre bias7, it is thus
possible that a liberal8 bias can be perceived in the reporting and analysis of the events,
despite the author’s best efforts.
4 China’s rise: from economic to global power
China’s accession to the WTO took place in 2001 after 15 years of negotiation and important changes in its economic policies so as to comply with the international organization’s requirements. While the accession to the multilateral trade system opened up new markets for Chinese exports and thus accelerated the economic rise of the country, China had already “emerged as a major player in the global economy” (Lardy 2001) at a faster pace than any other country since the 1980s by adopting free-market reforms and thus a capitalist approach to production.9 Foreign trade between 1970 and
2000 grew by 23 times, to reach $475 billion. Foreign direct investments were flooding the Chinese market, to become “the second-largest recipient of foreign direct investment” (Lardy 2001) in the world. Furthermore, Chinese firms became an important investor in foreign countries, becoming by mid-1990s “the eighth largest supplier of outward
7 The US political spectrum is basically articulated around two key elements: the rights of individuals and
the role of the government in society. Left-wing ideology, also called liberal, emphasizes the importance of the government’s interventions in the well-being of a society, through regulations and entitlement programs. On the opposite, right-wing or conservative philosophy stresses the crucial role of individual rights and civil liberties while reducing the role of the government in the society at the minimum (Brauer, Rosta 2020).
8 For further details, please refer to Footnote 7.
9 China defined its form of capitalism as being state capitalism, where the central government owns and
investment among all countries” (Lardy 2001). With an average growth of six per cent over the last 20 years, the country became the world’s largest trading nation in goods in 2013 and the second economic power after the US in 2018. After China’s access to WTO’s, the country’s share of global GDP increased rapidly, from 4% in 2000 to 16% in 2018 (Woetzel, Seong, Leung 2019).
The Belt and Road Initiative (BRI) symbolizes the growing ambitions of the country. Also referred to as the new silk road, “the vast collection of development and investment initiatives” is “one of the most ambitious infrastructure projects ever conceived” (Chatzky, McBride 2020). Launched in 2013 by Chinese President Xi, the enterprise is humongous, comprising 900 projects and involving more than sixty countries with a total estimated investment of over $1.3 trillion by 2027. For Economy, “under Xi, China now actively seeks to shape international norms and institutions and forcefully asserts its presence on the global stage” (2020).
As China became “the world’s largest economy (on a purchasing power parity basis), manufacturer, merchandise trader, and holder of foreign exchange reserves” (Morrison 2019), its influence over the world’s affairs kept growing to the point of outshining to the US. Indeed, while the world has been progressively more exposed to China, the opposite trend is true for the US, according to the China World Exposure Index10. This decline
implies that the world has slightly “diversify[ed] its trade, capital, and technology flows” (Woetzel, Seong, Leung 2019, p. 57). The US hegemony over the world order had been little disputed since the Cold war, and the rise of China is representing an unprecedented challenge to its global dominance in economic, technology, political and military forces (Gwiazda 2010; Stokes 2018). In consequence, the current trade wars opposing the US to one of its major trading partners may also be interpreted from this perspective. The rivalry between both powers is taking a variety of forms, such as conflicts over diplomacy, technology, or economics.
Influence over international organizations
The influence a country possesses over the multilateral organization’s system is a strategic form of power in the 21st century, “as it can shape the rules and norms of global governance” (Wadhams 2020). In consequence, international agencies became a new battleground for the US and China’s spheres of influence in the aftermath of the 2008
10 The China Exposure Index has been developed by the McKinsey Global Institute and aims at
“analyz[ing] the mutual exposure of China and the rest of the world on trade, technology, and capital.” (Lee 2019)
economic crisis, with growing “calls [from] China for greater representation in institutions” (Olson, Prestowitz 2011). These traditionally reflect the US philosophy on the world due to the unilateral balance of power since the end of the Cold War. However, according to critics, President Trump’s administration had shown signs of scorn, disinterest, and neglect towards America’s role in global governance and this since the beginning of his mandate until recently (Wadhams 2020). Expanding Chinese influence overinternational organizations have exacerbated the already existing tensions between the US and China, to the point that the current “the US state department has appointed a new special envoy with a mandate to stall China’s growing influence at the United Nations […]” (Lynch 2020).
The US recently successfully lobbied up to 80 governments to “stop China’s candidate Wang Binying, from winning the election to lead the World Intellectual Property Organization […] (Bloomberg News 2020) beginning of March 2020. On the one hand, the US argue that China’s practices concerning intellectual property are not aligned with its WTO commitments11. On the other hand, China’s officials consider US efforts as
“disgraceful means” (Bloomberg News 2020) to stop its rise.
Technology and telecommunications
“Made in China 2025” is the first stage of a larger three-step strategy to transform the country into “the leader among the world’s manufacturing powers” (Morrison 2019, p. 1) by 2049.
The current industrial policy conducted by the country aims at securing China’s position as a technology leader in ten different high-tech manufacturing industries12 by 2025. The
initiative was launched in 2015 with the main underlying goals to improve the overall manufacturing quality, increase the labor productivity as well as the domestic supply of essential spare parts, reduce the dependency on foreign technology inputs and foster domestic Research and Development (R&D), in order to move up the value-added chain and thus escape the middle-income trap13 (Morrison 2019; McBride, Chatzky 2019). With
11 For further details, please refer to Section 22.214.171.124 entitled “Forced technology transfer – theft of US IP”. 12 The ten key sectors are the following: new information technology, numerical control tools, aerospace
equipment, high-tech ships, railway equipment, energy-saving, new materials, medical devices, agricultural machinery, and power equipment. President Trump’s Section 301 sanctions put in place since the beginning 2018 have partially targeted intermediate and capital goods, including in the technology sectors, a move that may potentially slow down China’s ascent (ISDP 2018). For further details, please refer to Section 8.3 entitled “Section 301 of the Trade Act of 1974”.
13 The middle-income trap is a theory of economic development. It usually refers to countries that have
experienced rapid resource-driven growth based on exports, thus achieving a middle-income status but that are stuck in this phase, unable to enter the high-income countries’ club. The main reasons
the declared objective to become a direct competitor to the most developed and advanced economies, the initiative is considered as worrisome by several countries, including the EU and the US, as it “appear[s] to signal an expanded role by the government in the economy” (Morrison 2019, p. 1). Domestic Chinese firms are expected to receive low-interest loans and bonds by state-owned banks14, thus giving them an
unfair advantage, according to Washington (ISDP 2018). Furthermore, the initiative may incite the Chinese government to acquire or invest in foreign technology companies owning a high-level of IP or technology so as to reach the Made-in-China 2025’s goals (Morrison 2019, p. 2). An analysis made by the EU Chamber of Commerce in China in 2017 raised additional concerns concerning the targets of Chinese SOEs purchases in Europe, fearing that they represent a “‘shopping list’ of companies and technologies that China has not been able to develop domestically” (Wuttke 2017, p. 67). In addition, the replacement of foreign inputs by domestic ones in various sectors15 is seen as an import
substitution plan, which will hurt high-technology companies that supplied these goods until then (ISDP 2018; Morrison 2019, p. 2).
Leadership in innovation and technology has been a particularly strong advantage for the US since the Cold war, ranking third in the World’s top innovators in 2018 (Radu 2019). China, on the other hand, has been regularly accused of Intellectual Property (IP) infringements, which theft is estimated to “[have] cost the US $225 billion to 600 billion a year” (Smith 2019).16 In these circumstances, China’s rise in technology has thus raised
concerns in President Trump’s administration, and the Made in China’s initiative is believed to pose a risk for US national security.
The US government has imposed a set of retaliation measures concerning Chinese investments in the US, as well as restrictions for “American technology companies to do business with China” (Donnan, Leonard 2020). Chinese exports of telecommunication equipment have also been the target of additional regulations set out by President
are thought to be rising wages that reduce their competitive advantage, weakening demand, low level of innovation, competitiveness, and value-added compared to high-income economies, which make them struggle to compete in an international environment. (Glawe, Wagner 2016; Felipe, Abdon 2012; World Bank, WTO 2017, p. 123)
14 For further details, please refer to Section 126.96.36.199 entitled “Subsidies and quotas”.
15 The Made-in-China 2025’s strategy set out goals to reach concerning the domestic contents of products
in the sectors of agricultural machinery, basic material products, high-tech maritime vessels, electric vehicles, batteries and engines, core components of medical devices, mobile devices, high-performance computers, industrial robotics and advances medical devices (Morrison 2019, p. 2). By 2025, the domestic content of products in these categories is expected to reach 70 per cent. One can notice that most of the products may be categorized as either intermediate or capital goods.
Trump’s administration. One of these actions was the blacklisting in May 2019 of the Chinese company Huawei, accused of being under the central government’s thumb and of “facilitating [the users’] espionage or data theft at the behest of China’s intelligence agencies if asked” (Doffman 2019). On June 25th, 2020, the US Department of Defense officially designated Huawei as being “owned or controlled by the Chinese Military” (Reichert 2020), an accusation that would allow President Trump’s Administration to sanction the company if they continue their operations in the US.
Huawei is the worldwide leader in 5G networking equipment, far ahead of any competitors, and its dominant position is considered as an additional threat to US national security. 5G networks are perceived as controlling how the countries are wired and communicate internally. Despite the pressure and the threats by some US senators to “remove a preferred investment status17 for countries that allow the installation of
Huawei Technologies Co. equipment in their 5G networks” (Morales, Seal 2020), the United-Kingdom (UK) decided in January 2020 to defy President Trump by allowing the Chinese vendor to build non-sensitive parts of its network, while still taking into consideration potential threat to domestic security (Leonard 2020). However, the country reversed its decision on July 14th, 2020, banning the Chinese telecommunication company totally from participating in the development of the UK 5G infrastructure, a move considered as a big win for the Trump administration (Gold 2020).
The geopolitical battle’s latest victim is TikTok, a social network allowing to share video between the users, which is owned by the Chinese company ByteDanse. As the media gained additional subscribers in the US so as to reach 80 million monthly active users, fears were expressed that the app was used to collect personal data from US citizens, which would then be shared with the Chinese government (Liao 2020). President Trump’s administration also raised the possibility that these private pieces of information may be used to meddle in the forthcoming US elections in November 2020 (Zhong 2020). Despite the denials of TikTok’s owner, the US administration announced on August 1st, 2020, that the app will be banned in the US territory over security concerns in the near future (BBC News 2020).
17 The Foreign Investment Risk Review Modernization Act “scrutinizes direct investments such as real
estate and venture capital deals by foreign countries in the U.S.” (Leonard 2020). Some close partners from the US, such as Canada, the UK, or Australia, are exempted from any screening before investing.
OFDI and Monroe Doctrine
China’s investments in foreign countries or Outward Foreign Direct Investments (OFDI) have considerably grown since 2002 as a complementary approach to fully integrate the world economy, promote innovation as well as cross-border collaboration. OFDI flows hit a record high in 2014 to reach up to $116 billion compared to $7 billion in 2001 but accounting only for 3 per cent of the world total (Sauvant, Nolan 2015, p. 2). Known under the “go global” policy according to the Eleventh Five Year Plan18, the investments,
mostly done by State-Owned Enterprises (SOEs)19, have mainly targeted Asia and the
African continent (Sauvant, Nolan 2015, p. 5). Nonetheless, OFDI has increased steadily in Latin America for a couple of years, since the BRI’s launch in 2013, with a boost of investment in Brazil and Colombia following the beginning of the trade wars in 2018. China is now the largest creditor of the region, through its state-owned banks, as well as “the region’s largest trading partner” (Woetzel, Seong, Leung 2019, p. 56).
While the US has opposed little resistance to the expansion of Chinese investments in Asia and Africa, Latin America was a more sensitive subject. The main reason was the Monroe Doctrine, which has been invoked by the Trump administration at the beginning of 2020, “a two-century-old claim of U.S. primacy in Latin America” (Jaramillo, Fieser 2020). In 2019, China invested in Colombia more than in the last fifteen years combined, partly due to the slackening of the links between the US and the Latin American country. Despite the US being a long-term partner of Colombia, President Trump’s attacks against the perceived failure of the Colombian President to curb the drug traffic, combined to the threat of ending the country’s economic aid, cast reasonable doubt over US dependability. The situation brought Colombia to diversify relationships and turn to other partners, in particular to US’ new nemesis, China (Jaramillo, Fieser 2020). Brazil is considered following the same path as Columbia, through the strengthening investment and economic ties with China while trying to maintain a close relationship with Trump’s administration. The establishment of a specific team dedicated to trading ties with the Asian country seems to be a sign that Brazil is preparing for increased Chinese investments in the region (Adghirni, Iglesias 2020).
18 The Five-Year Plans are initiatives of social and economic development established and implemented
by China’s central government. The First Plan was launched by Mao Zedong in 1953 so as to industrialize the country, while the current Thirteen plan (2016-2020) focuses on innovation and includes the Made in China’s initiative.
19 For further information on this matter, please refer to point 188.8.131.52 entitled “Subsidies and Quotas” as
Despite China’s declaration concerning the fact that the country “is not trying to compete with Washington for political influence, only to invest” (Jaramillo, Fieser 2020), Chinese firms’ keen interest in Latin American countries for OFDI has raised concern for its overall position in the region.
“America First” Agenda & multilateral trade
The multilateral trading system has been partially shaped by US influence, due to the economic and political importance of the country. Thus, the turns operated under President Trump’s leadership has shaken and undermined the basis of the modern global trading order as the world has known it, threatening to reinstate the law of the jungle’s approach between commercial partners (Baschuk 2020).
US trade policies currently conducted by Washington are considered as “accelerat[ing] and exacerbat[ing] the fraying of the multilateral system” (Pascal 2019). President Trump’s obsession with America’s interests has brought back a more aggressive approach to trade and negotiation, a relic of the 20th century’s power politics (Baschuk 2020), consequently shifting the understanding of the notion of cooperation that was once at the roots of its development.
The US fall-back from the multilateral system has taken various forms since President Trump’s presidential inauguration in January 2017. The country withdrew from several international organizations, respectively, the United Nations Educational, Scientific and Cultural Organization (UNESCO) in as well as from the United Nations Human Rights Council (UNHRC) in June 2018. Several global agreements have seen as well the disengagement from Washington, such as the Trans-Pacific Partnership (TPP) in January 2017 and the Paris Climate Agreement in June 2017 (Bump 2018). The country also stepped out of the Joint Comprehensive Plan of Action, better known under the name “Iran nuclear deal” in May 2018 (Landler 2018). Last but not least, on July 9th, 2020, the US officially notified the UN General-Secretary of the country’s intentions to withdraw from World Health Organisation’s (WHO) membership, following the Covid-19 outbreak in China (Gostin, Koh 2020).
With a contribution of 22 per cent to the total UN budget, the US “remains by far the biggest single financial contributor to the global organization” (Schwirtz 2018). However, since the beginning of Trump’s presidency, the US has cut funds to several programs
and has explicitly linked “America’s financial generosity around the world to support for American priorities,” as stated by the country’s then-ambassador to the UN, Nikki R. Haley on September 20th, 2018 (Schwirtz 2018). The latest victim of this strategy is the World Health Organization (WHO), whose funding was partly suspended by President Trump on April 14th, 2020, shortly before the US announcement of the country’s withdrawal from the organization. An investigation is conducted by the US authorities so as to determine if the organism has failed in the management of the current Covid-19 pandemic. The WHO is accused of having over-relied on China for data about the new virus as well as overlooked the efforts of the country to control and restrict the information flow (Kupferschmidt, Cohen 2020).
The grounds cited were quite similar in most cases, with the common motivation that supranational entities are perceived as threatening US sovereignty and violating the national constitution (Sims 2016). The rule of law for international trade embodied by the WTO and its dispute settlement system was crippled in December 201920, as the
dispute-settlement system was paralyzed by the US kept blocking the appointment of new judges to the Appellate Body (Baschuk 2020).
Additional initiatives were taken by the US in order to force the country’s interests on the front of the stage. The US is increasingly focusing on the negotiation or renegotiation of bilateral trade agreements discussed outside the framework of the WTO instead of safeguarding the multilateral cooperation, with the risk of “weaken[ing] the fundamental set of rules for world trade” (Langhorst 2007, p. 7). “[President] Trump is aiming for agreements with the U.S.’s biggest trading partners” (Wingrove, Leonard, Horobin 2020), with some of them already signed or even ratified by the different parties, such as Canada, Mexico, South Korean and Japan.
The renegotiation of the North American Free Trade Agreement (NAFTA) with Canada and Mexico was already a top priority during President Trump’s advertising campaign in 2016, and he did not fail to fulfill his promises. The new Free Trade Agreement (FTA), renamed United-States, Mexico, Canada Agreement (USMCA), has been signed and ratified by the three countries between the end of 2019 and the beginning of 2020. While some specialists perceive the changes as being purely cosmetics or worse, as disguised protectionist measures, the new deal is believed by the US to have in the future a
significant positive impact on the country, boosting trade between the nations and bringing back manufacturing jobs to the territory (Sink, Jordan 2020).
America First policy has resulted in a change in negotiation style and strategy from the US government towards its partners, with a resurgence of the law of the strongest. The country has already started to wield the country’s economic power to obtain concessions and favorable trade terms (Swanson 2020). According to Donnan, threats of imposing tariffs has become the new favorite US way of bargaining, as retaliation measures if the opposite countries do not respond favorably and abide by US demands (2020). This “do as we demand or we’ll whack you” (Donnan 2020) approach was used against the EU on several occasions in 2019, pressuring specific countries to abandon the implementation of a digital tax21 that would also affect US tech companies.
While acknowledging that the multilateral system and its components have some flaws and could contemplate some improvements, the vast majority of countries around the globe recognize the benefits of the structure such as reciprocity, trade facilitation, and cooperation (Hillman 2020). Accordingly, the EU is determined to uphold multilateralism in international trade, considered as “a defining principle for the bloc” (Stearns, Donnan 2020) and is ready to strengthen its game by extending its trade and legal arsenal so as to counter President Trump’s strategy (Stearns 2019).
5 Trade flows between the three biggest economic
The section aims at giving an overall picture of the trade links between the US, China, and the EU-28, namely the three most significant economic power, in 2017. This time point was selected as it was before the implementation of additional trade barriers22 by
President Trump and thus provides a neutral starting point concerning the interdependency of the three nations when related to trade. The data on the EU include the UK, as it was before the country’s effective withdrawal from the EU. For the sake of
21 France has implemented mid-2019 a tax that would levy up to 3 per cent on the revenue of companies
that “make their sales primarily in cyberspace”, (Horobin, White 2019) so as to ensure that they pay taxes on the territory on which they generated sales rather than where these companies have their headquarters, to reduce the practice of tax shifting to low-tax jurisdictions (Horobin, White 2019). This subject is developed further in part 7.2.5 entitled “Digital-services tax in France”.
22 According to Bown’s calculation, up to 3.8 per cent of the total US imports were subject to “special
trade restrictions applied under US trade laws” (2017a, p. 1), including on steel and aluminum as well as on solar panels and modules in 2017.
simplicity, the EU-28 will be referred to as only EU in the rest of the work. Following the general practices in international trade statistics, intra-EU trade is excluded from the data.
Table 2 – Trade flows’ Overview
(Source: WTO 2018a23; 2018b24; 201925)
With a GDP of $19 trillion in 2017, the US was the world’s largest single economy, followed then by the EU and China, with GDPs of respectively $17 and $12 trillion. The EU was in 2017, the number one nation in total trade, with $4.2 trillion, $114 billion higher than China, and $263 billion above the US records.
The trade-to-GDP ratio or percentage of total GDP “measures the importance of international transactions relative to domestic transactions” (OECD 2011) and thus the integration of the economy in global trade. Trade accounted for only 20 per cent of the US GDP while it went up to 34 per cent for China, making the economy of the latter logically more dependent on commerce.
The three countries presented completely different trade profiles: while the US may be considered as mostly an importer, with 61 per cent of imports and only 39 per cent of exports, China has almost an opposite ratio: the country’s exports amounted to 55 per cent of its total trade, while the imports were only 45 per cent. The EU, with exports and imports accounting each for 50 per cent of total trade, seemed to position itself as both a destination and origin when it comes to merchandise trade.
23 Name of the report: World Trade Statistical Review 2018 24 Name of the report: WTO Trade Profiles 2018
25 Name of the report: WTO Trade Profiles 2019
(In Millions $)
% of total GDP
1'546'725 2'122'457 2'263'329
Top trading partners
The three leading international trade players seemed to form a commercial triangle, as they had a sizeable amount of trade between them. Each country appeared in the top three trading partners of both others. The EU is the principal trade ally for both the US and China, with respectively 20 and 15 per cent of the countries’ total commercial exchange. The key numbers for the three partners are presented in one table in Appendix 2 for easier reading and comparison.
Table 3 – US Trade Partners (2017)
(Sources: WTO 201826; 201927)
The US traded mainly with four partners, each of them accounting between 14 et 20 per cent of Washington’s trade. With 20 per cent, the EU is the leading destination and origin of the US trade in goods, followed by a tight game between China and Canada, each with circa 15 per cent of US total trade’s share. China was the largest single trading partner. Up to 69 per cent of the US two-way merchandise trade was done with only five trade partners, an element that may show a heavy reliance on existing trading relationships.
Ranked by exports, the EU and Canada were the leading destinations for US exports, each of them accounting for 18 per cent of all exports of the country. Mexico, another US’ neighboring country in addition to Canada, followed as the third biggest importer of US goods, with 16 per cent. Accounting 8 per cent of US total exports, China ranked
26 WTO | Publications | Trade Profiles 2018 27 WTO | Publications | Trade Profiles 2019
Million US$ Main trading
partners Total trade
% of total trade
balance Million US$ % Million US$ %
EU28 808'321 20% -242'219 283'051 18% 525'270 22% China 575'681 15% -315'832 129'925 8% 445'757 19% Canada 589'057 15% -22'955 283'051 18% 306'006 13% Mexico 560'889 14% -75'218 242'836 16% 318'053 13% Japan 207'807 5% -71'695 68'056 4% 139'751 6% Others 1'214'466 31% -134'852 539'807 35% 674'659 28% 1'546'725 100% 2'409'495 100% Merchandise Exports Imports
fourth as destination for US exports. Japan was the fifth market for US exports, with 4 per cent of all US exports. Only 35 per cent of total exports going to trading partners outside of the top 5.
In terms of imports, almost half of the US imports or 41 per cent came from only two trading partners, the EU and China, with respectively 22 and 19 per cent of all imports. Canada and Mexico were the third and fourth leading sources of US imports, each of them with an 18 per cent share of all US imports. Japan was the fifth origin of US imports, with 6 per cent.
As little as 28 per cent of all imports originated from countries out of the top 5 trading partners. The US is thus highly dependent on the existing trading partners, at least on a short-run perspective.
Table 4 – EU Trade Partners (2017)
(Sources: WTO 201828; 201929)
In 2017, the US was the EU’s top trading partners in total trade, the country amounting to 16 per cent of merchandise trade. China was EU’s second most significant economic partner, with 15 per cent of total trade, followed by Switzerland, Russia, and Turkey, each of the countries with a merchandise trade’s share of between 4 and 7 per cent of all trade. More than half of the total trade was conducted with countries outside of the top 5 trading partners, a much more diversified approach than the US.
28 WTO | Publications | Trade Profiles 2018 29 WTO | Publications | Trade Profiles 2019
Million US$ Main trading
partners Total trade
% of total trade
balance Million US$ % Million US$ %
US 690'555 16% 124'468 407'512 19% 283'043 14% China 631'595 15% -202'859 214'368 10% 417'227 20% Switzerland 289'252 7% 41'851 165'552 8% 123'700 6% Russia 240'151 6% -53'375 93'388 4% 146'763 7% Turkey 170'963 4% 15'813 93'388 4% 77'575 4% Others 2'196'558 52% 99'940 1'148'249 54% 1'048'309 50% 2'122'457 100% 2'096'618 100% Merchandise Exports Imports EU28