Dhaka, Bangladesh (BBN)– United States and China are world’s two biggest economies. Trade and economic relations between the two countries are of great significance for world economy, a global chamber said.

“Bilateral trade and economic ties between China and the US have developed steadily over the decades. Recent trade friction between these two countries has clouded their relations,” International Chamber of Commerce-Bangladesh (ICCB) said in its editorial of the current news bulletin on Monday.

Based on purchasing power parity (PPP) China has been the world’s largest economy for last three years having economic output of $23.12 trillion, followed by EU countries ($19.9 trillion) and US ($19.4 trillion ) according to 2017 World Factbook of CIA (Central Intelligence Agency).

The world’s three largest economies combined have produced $62.4 trillion, 49 percent of the world’s total economy.

Currently, the US is China’s biggest export market and sixth biggest source of imports. On the other hand, China is the fastest growing export market and biggest source of imports for US.

The tariff fight between the two countries is often cited as the biggest risk to global investor confidence and a threat to the world economy.

According to the recently released White Paper by China, regarding trade and economic frictions with the US, trade between the two states reached US$583.7 billion in 2017.

The Trump administration has instigated a trade war with China by imposing tariffs on a total of $250bn of imports from China.

As counter to the US move, China is also imposing tariffs on $110 billion  of imports from US.

There have been warnings from both the private and public sectors about the potential spillover effects on the world economy of the ongoing trade war between the two world economic powers.

As a matter of fact for most Asian nations, China is their single biggest trading destination while the US remains an invaluable economic partner.

“As a result, the escalating tensions between the two economic giants have caused unease for the region,” it noted.

In November 2018, Asia-Pacific Economic Cooperation (APEC) meeting in Papua New Guinea could not come up with a joint statement – the first failure of this kind in the entity’s 25-year history due to the fight for dominance in the Pacific region between Australia, the US and Japan on one side and China on the other.

This Summit has seen the unspoken tug-of-war for the Pacific coming out in the open.

However, US and China agreed to a temporary truce to escalate trade tensions, during G20 Summit in Buenos Aires on December 1, 2018.

Under the agreement, both the US and China will refrain from increasing tariffs or imposing new tariffs for 90 days (until March 1, 2019). On January 7, official delegates from US and China began trade talks, which were held in Beijing-the first face-to-face meeting since agreeing to a 90 days truce. Both sides have agreed to continue to keep in close contact.

As globalization moves forward, the economies of the world are increasingly connected through trade. Trade has become a major engine for growth.

According to the World Bank, the international economy’s dependence on trade rose from 17.5 percent in 1960 to 51.9 percent in 2017.

The “World Economic Outlook” report released by the IMF on 17 April, 2018 noted that raising tariffs and non-tariff trade barriers will disrupt the global value chain, slow down the spread of new technologies, lead to a drop in global productivity and investment and ultimately slow down growth trajectory.

In October, the IMF also cautioned that all countries would suffer as a result of the tensions and cut back its GDP projection for the US to 2.5 per cent in 2019, and further still to 1.8 per cent in 2020.

This has undoubtedly cast a long shadow worldwide at a time when US growth has been critical to the global economy.

“A trade war cannot help the entrenchment of trust and constructive cooperation in US-China relations,” the ICCB noted.

So it is crucial for both the countries to mitigate ongoing rivalry without losing any further time to ensure sustainable global economic growth, it added.