OBOR Initiative

What’s behind the latest US-China trade fight?


From UPSC perspective, the following things are important :

Prelims level: NA

Mains level: Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora, Indian Economy, and issues.

Why in the news? 

China’s burgeoning production of electric cars and other green technologies has become a flashpoint in a new US-China trade fight, highlighted by US Treasury Secretary Janet Yellen during her five-day visit to China.


  • According to the Paris-based International Energy Agency, China has built a substantial car industry that accounts for 60% of global electric vehicle sales. Similar dynamics exist in other industries, such as solar panels, batteries, and steel.
  • China is now the world’s largest producer of solar cells.
  • Now the main concern is that the Chinese are building up a lot of capacity in many industries across the board, including these new technology sectors, and if domestic demand does not pick up, they are going to be looking for markets outside the country.

US-China Trade Dispute:

  • The US and China have been slugging it out since Trump slapped heavy tariffs on imported steel and aluminum items from China in March last year, and China responded by imposing tit-for-tat tariffs on billions of dollars worth of American imports.
  • The IMF noted that the US-China trade tension was one factor that contributed to a “significantly weakened global expansion” late last year, as it cut its global growth forecast for 2019.

US-China Trade and Investment Facts:

  • US GOODS & SERVICES trade with China totalled an estimated $737.1 billion in 2018. Exports: $179.3 billion; imports: $557.9 billion; deficit: $378.6 billion
  • CHINA IS CURRENTLY the US’s largest goods trading partner with $659.8 billion in total (two-way) goods trade in 2018. Exports: $120.3 billion; imports: $539.5 billion; US goods trade deficit: $419.2 billion
  • US FDI IN CHINA (stock) was $107.6 billion in 2017, a 10.6% increase from 2016. US direct investment in China is led by manufacturing, wholesale trade, finance and insurance
  • CHINA FDI IN THE US (stock) was $39.5 billion in 2017, down 2.3% from 2016. China’s direct investment in the US is led by manufacturing, real estate, depository institutions

How does China’s Auto Industry pose an external threat to Indian Market?

  • Market Dominance: China is dominating the local market and threatening to dominate India’s traditional export markets, which could cause concern for the ‘Make in India‘ program.
  • Quality Concerns: The quality of auto parts coming from China is a major concern for the safety of vehicles in India. With increasing stakes by Chinese vendors, the situation is expected to become more challenging.
  • Cost Advantage: Chinese automakers have a cost advantage over North American and European brands, allowing them to undercut rivals. This cost advantage is due to Chinese manufacturers’ ability to produce EVs more efficiently and profitably than their Western counterparts.
  • Security concerns: Chinese automakers flooding foreign markets with their autos and the potential for these vehicles to be used for espionage, data collection, or sabotage.

How India can benefit from the ongoing US-China trade war?

  • Export Opportunities: India can tap export opportunities in both the US and China, particularly in areas such as garments, agriculture, automobile, machinery, apparel, and readymade garments
  • Export Growth: India’s exports to the US increased by 11.2% in 2018, and to China by 31.4% in the same year, indicating the potential for further growth
  • Product Opportunities: India can boost exports of around 350 products to the US and China, including items like copper ores, rubber, paper/paperboard, industrial valves, vulcanised rubber, carbon or graphite electrodes, and natural honey
  • Trade Deficit Reduction: Increasing exports would help India narrow the widening trade deficit with China, which stood at USD 50.12 billion during April-February 2018-19

Conclusion: The US-China trade fight intensifies over China’s dominance in green technology sectors like electric vehicles. India stands to benefit from increased exports to both nations, potentially narrowing its trade deficit with China while tapping into new markets.

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Notify of
Inline Feedbacks
View all comments


Join us across Social Media platforms.

💥Mentorship New Batch Launch
💥Mentorship New Batch Launch