By now, what had once been on the backburner of the economic world, slowly simmering but never truly making a big debut in headlines, has become commonplace knowledge.
The US-China trade friction has been blown out of proportion as they approach obtaining the record of ‘largest trade war in economic history to date’ according to China’s own Ministry of Commerce. In his election campaign in 2016, Donald Trump stated that China has inflicted severe damage to the US economy with unfair trade practices, an allegation that has since been mirrored in his economic policies against China under his grander scheme of ‘Make(ing) America Great Again’.
But is this defensive stand wise?
Although USA’s economy may be more powerful on a global scale, China has a greater economy in terms of volume of goods produced, services and GDP. In order to diminish this, upon becoming President, Trump ordered an investigation into China’s trade policies. And on July 6th, 2018, US implemented their first China-specific tariffs. Under the leadership of President Xi Jinping, China then retaliated by imposing tariffs on US products worth US $65 billion. This economic conflict has stimulated detrimental impacts on large companies such as Apple, who are struggling to meet their costs. They usually manufacture individual parts in China and assemble the final product in USA. But with hefty taxes on each of these parts, Apple’s cost of production has skyrocketed, forcing the cost to be passed onto consumers in the form of high prices. Thus follows a vicious cycle of consumer product inflation.
As a result, CEOs have begun to diligently study law books as they scramble to find legal options to avoid paying these cumbersome duties. Some companies have even considered relocating their production factories to Mexico – but then they face the problem of the US-Mexico border wall, an obstacle that’s bound to curtail economic relations between the two countries if it ends up being erected.
Status on Chinese products
On the other hand, these new tariffs may have tipped the scales in the US’ favour ever so slightly. The curtail on Chinese products has dwindled the US trade deficit, which could boost domestic markets, strengthening their economy. However, there is an expected rise in unemployment in USA, as farming bankruptcies begin to soar. Additionally, the war has also disrupted the global supply chain possibly spreading the trade war to nations such as Africa and Venezuela. As U.S. negotiators head to China next week, many strategists expect to see some signs of attaining an eventual agreement. But even this meeting comes at a time of great strain – many analysts are skeptical of whether it will ever happen.
Hopes
One can only hope that they can diffuse the bomb of this trade war as its impacts will be of upmost importance in the geopolitical landscape of the future, not just for the United States of America and the People’s Republic of China, but the fate of global economy relying on them.
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