Automation Industry Trade war : US China Conflict

US China Automation Industry Trade war

Automation Industry Trade war is the topic where we have covered how trade war between China and US can affect “Automation Industry” in near future. If you are looking closely towards the future of automation around the globe then Automation Industry Trade war is the topic you must read.

Automation Industry is likely to be affected from the trade war between worlds two biggest economies US and China. It is clear that Automation will most certainly transform jobs in manufacturing. US is not the single country in the world that is adopting automation. Other countries, especially China, are also investing heavily in these technologies. In recent years China has bought more than one third of the robots of the world in the Industry.

In Obama’s term, US has not invested much in buying robots but kept US technologies always ahead. Proceeding the same Trump government is also not investing much in science and robotic automation.US has worries towards unemployment due to automation. In case of China, automation is increasing rapidly in the industry to cut down the cost in manufacturing and all. In recent years China has bought more than one third of the robots of the world in the Industry.

In fact Chinese government is helping industries to automate rapidly to counter rapidly increasing economies like India and Vietnam in the surrounding. The scenario of Trade war rose by the US imposition of tariffs on a range of Chinese imports. As we all know china is very conservative towards any other industrial entry in the country. US is playing the same game. Now let us understand trade war first.

What is  Trade War?

To understand A trade war let us assume two houses of business “House A” and “House B”. In normal conditions people from “House A” can sell their goods or services in “House B” without much taxes and vice versa. But if “House B” increases taxes or barriers especially for “House A” and excluding these taxes to most of the houses, that may result in economic conflict between the two Houses (House A and House B). Technically this is called Trade War.

Now If we summarize it more professionally we can say A Trade War is an economic conflict resulting from extreme protectionism in which states raise or create tariffs or other trade barriers against each other in response to trade barriers created by the other party.

Trade War Between US And China

It all started with China’s conservative behavior towards global industries. China in current scenario is looking for higher end technologies and is willing to acquire the market within 2025. Whereas US being one of the most advanced in automation and robotic technologies has restrained its resources to counter China’s conservative policy. Also transfer of the the high end automation technology may fuel unemployment in US. In this scenario China can be a serious threat to US if it becomes technically equal. US imposition of tariffs on a range of Chinese imports was the step of Trump Government to show conservatives of US.  

The tit-for-tat exchange of tariffs between the United States and China gives the signs that the world’s two biggest economies are fueling up for the trade war. 

Let us consider some facts

  • The US is targeting hi-tech automation manufacturers to disrupt President Xi’s flagship industrial strategy, the Made in China 2025 plan.
  • Made in China 2025 plan seeks to make Chinese manufacturing globally competitive by introducing more artificial intelligence and automation.
  • The ability of developing economies such as China to “match” with developed economies depends on their being able to access and adapt the best technology in the world. This is the main reason for conflicts.
  • The US has launched these trade measures in retaliation for China’s poor record on intellectual property rights protection, which includes requiring foreign companies to transfer their technology as a condition of investing in China.

Possible Consequences

Any disruption to supply and distribution chains, which are a key part of world trade, could have a lasting impact. In the worst-case scenario, companies may have to relocate factories or distribution centres. Investment decisions affect employment and taxes raised, and are in some ways more disruptive than tariffs, which can be reversed more easily.

  • The trade war may trigger damages for the US and Chinese economies simultaneously. As many of the global companies, such as Apple, Google, invest in both countries. This may affect US businesses as well as American consumers.
  • Many retailers like Walmart import goods from China, so prices would go up and living standards would be tough. And since US goods are sold worldwide, if they are reliant on parts from China especially the electronic once, consumers in the rest of the world will also be affected.
  • The same applies to Chinese consumers and Industries, particularly since about half of Chinese exports are made by enterprises with foreign investors.
  • China has shown reluctance to open up its relatively closed markets to foreign competition. But the harsh truth is, “It firmly believes its industries need protection against the dominance of multinational companies“. Although it has some of the biggest companies in the world, such as Alibaba, Huwaei, Baidu, Xiomi and Tencent. And more competition may well improve China’s growth prospects by increasing productivity, especially in automation sectors where there are less efficient state-owned enterprises.

So, in the age of automation there is a lot at stake for both countries.  A trade war is not fruitful for any one of them. Neither it results in better protection of US technology or give American firms better access to Chinese markets. Nor would it help China invest in America. Some more round of talks are awaited between US and and China. Automation Industry is having an eye in it to avoid trade war as there is inter dependency in the global market.