Written by student-Xuhui(Emma)

With the profound transformation of the form of international division of labor, the form of international trade has developed from finished goods trade to intermediate goods trade, and the distribution of global economic and trade benefits has also changed to the form of value chain. Under the current multilateral trading system, the comparative advantages of industries of various countries are further highlighted, and economic and trade integration is further strengthened. China and the United States, as the world's largest developing countries and developed countries, have played an important role in the restructuring and rebalancing of global economy.

US-China trade relations under the division of global value chains

1. Position of the Division of Global Value Chains between China and the United States. With the rapid progress of global economic integration, the industrial advantages of China and the United States in the international division of labor are each highlighted, forming mutually beneficial and complementary economic and trade relations on the global value chains, and have common economic and trade interests. In terms of trade structure, the United States is China's largest goods trade surplus, while the United States is also China's largest service trade surplus. The trade between the two countries follows the principle of marketzation in the global industrial chain and resource allocation, forming a close complementary relationship. China's exports to the United States are widely covered by basic manufacturing products (mechanical and electrical products, household appliances, sporting goods, textiles, etc.), while the United States has maintained its export advantage in the high-end manufacturing sector (aircraft, automobiles, integrated circuits, etc.) to become each other's most important trading partner. As a global industrial chain and supply chain China is not only a "world factory" with the world's most complete industrial system, but also the world's largest quality human resources, forming a strong international competitiveness of the basic manufacturing industry. And compared with China's overall middle and low-end position in the global value chains, the United States' advantage in the field of high technology and marketing makes it more competitive in scientific and technological innovation and service industry, and occupies the high-end position in the global value chains. From the point of view of consumption structure, with the continuous strengthening of Chinese residents' material living standards and consumption capacity, the demand for American high-tech products and service cultural products in the Chinese market has increased rapidly. China's low-priced high-quality, well-chosen goods have increased the actual purchasing power of American consumers, made up for the economic structural defects brought by the traditional manufacturing industry of the United States, high consumption and low savings, and reduced the pressure of American inflation to a certain extent. It can be seen that the highly complementary trade relations between China and the United States are not only the basis for mutual benefit and win-win progress between the two countries, but also the strong driving force for further strengthening economic and trade cooperation between the two countries.
2. The trade deficit between China and the United States is the inevitable result of the division of labor in the global value chain. There is no denying that America's huge trade deficit with China has always been a sensitive issue in US-China trade relations. In particular, U.S. statistics show that in 2017 trade deficit with China hit another record high of $375.2 billion, making the issue of U.S.-China trade imbalance even more salient. But we should also analyze the problem objectively and rationally. Basically, the trade deficit between the two countries is the inevitable result of the international industrial division and the global allocation of resources, which is determined by the different position of the two countries in the global value chains, rather than the so-called unilateral or human factors. The significant differences in the development stage, economic structure, market size, factor endowment and industrial advantages of the two countries bring about the vertical difference between the two countries in the international industrial division of labor. The United States occupies the high-end of the global value chain, and its capital-technology-intensive industries have strong comparative advantages and international competitiveness. China is in the middle and low-end position in the global value chain, and the comparative advantage of labor-intensive industries such as basic manufacturing industry is obvious, and the product supply chain is complete. The complementarity between China and the United States in importing goods from each other is obvious.U.S. exports to China are mostly capital goods and intermediate goods, and China exports to the United States are mostly consumer goods and manufactured goods. As a result, the trade surplus between China and the United States is concentrated in goods trade, while the United States maintains its trade surplus with China in high-end manufacturing, service and agricultural trade. Moreover, with China's labor costs, industrial structure upgrading and trade structure improving, the trade surplus of goods between China and the United States will be further reduced. It should be noted that processing trade accounts for 61% of China-U.S. goods trade surplus. Because of the difference in the position of the two countries in the global value chains, compared with the low value added earned by China in the low-end processing link, the United States has gained great industrial and commercial benefits in the high-end design, market and parts supply links. On the other hand, the dollar is both the world's strong currency and the main currency for international trade settlement. The consumption structure of high consumption and low savings in the United States makes the current account deficit of the United States a regular phenomenon. And a large number of high-quality and low-priced goods from China meet the demand of the domestic consumer market in the United States, which is a useful supplement to the economic structure of the United States dominated by high-end manufacturing and service industries. While reducing the cost of consumer consumption in the United States, it has played a positive role in controlling inflation levels and completing industrial upgrading in the United States. Therefore, the objective reality of the trade surplus between China and the United States is that from the perspective of international division of labor and global value chains, the surplus, while benefiting from it in China, is shared by the two countries. It is worth noting that, due to ideological considerations, the United States has long imposed strict restrictions on China's energy and high-tech exports, and has also widened the trade deficit between China and the United States to a certain extent. It can be seen that the goods trade surplus between China and the United States is an objective result of the distribution of benefits in the global value chains on the basis of international division of labor, which should not be judged by the rules of "zero-sum game ", nor should it become an excuse for trade friction or even" trade war "between the two countries.

The "trade war" will cause more losses

As the world's largest developed and developing countries, the total economic volume, total export goods and total investment of the two countries account for about 40%, 25% and 30% of the world's total, respectively. As the representative of the emerging economies, China's perfect industrial system, low labor costs, and its growing innovation capacity and large market size are increasingly prominent in the global value chains and China has become the second largest economy. Therefore, economic and trade relations between China ans U.S. are not only the relationship between the top two major economic and trade entities in the world, but also the vane of the development of world economy and international trade, which also play an important role in the stability of global financial and investment markets.

In view of the long-standing complementary and mutually beneficial economic and trade ties between China and the United States and their contribution to the world economic development, it can be predicted that the beginning of the "trade war "between the United States and China, whether reflected in the trade data or, ultimately, the impact on the GDP growth of the two countries, will be both sides. China's dominant export chain will suffer from a slump in exports, with a maximum trade loss of $165.8 billion, if the U.S. raises tariffs on Chinese-related imports to a ceiling of 45%. And if China adopts reciprocal counter-measures, the US will face losses of up to $12.5 billion in consumer welfare, rising macro-costs, rising inflationary pressures, rising unemployment, declining profits for multinational corporations and declining GDP. The negative market expectations of the "trade war "between the two countries have severely affected US financial and capital markets, which have lost $1.8 trillion in market capitalisation in two days, and will hit US capital markets in the future if the US-China trade war escalates. It can be seen that if the United States wants to use "trade war" to solve the problem of trade deficit between the two countries, the multi-dimensional losses brought by the United States cannot be counted with simple trade data. On the other hand, the "trade war "between the two countries will not only harm the two economies, but also have a significant negative impact on the development of the world trade economy.In addition to affecting the global trade volume and increasing the risk of uncertainty in the field of international trade, the "trade war "between the two countries will also affect related markets such as global financial investment, resulting in higher global inflation, tighter monetary policy and slower economic growth, thus undermining the process of global economic recovery. More seriously, the multilateral trading system under the WTO framework, which allows countries to participate in global free trade according to the corresponding rules and settle trade disputes through consultation through corresponding mechanisms, is the embodiment of the multilateral relations of mutual benefit and win-win cooperation of the international community today. Unilateralism and trade protectionism are deviations from the principle of fair trade and undermine the existing rules of international multilateral trade, which will have a series of negative effects on the international multilateral trading system. Thus, the "trade war" is not only the loss of China and the United States, it will bring the result of multiple losses. The world will pay huge political and economic costs. Of course, interpreting the current "trade war" from another angle, china can also take this as an opportunity to change its power, strengthen its independent core scientific and technological research and development strength, speed up the transformation and upgrading of industry, and further realize the promotion of the division of labor in the global value chains.