China-United States Trade Wars
Introduction
Globalization led by progressive economies; for instance, the United States is gradually declining. In contrast, globalization led by emerging economies; for instance, China continues to develop. In recent years, China’s growth rate has continued to intensify, thus developing an enormous market surplus with America. Therefore, the U.S. has made China the primary target of ensuing trade war. Currently, the bilateral tensions among both nations continue to become visible and, as a result, hurting the universal economic integration. According to Chong, the trade tension is mainly attributed to the United States abandoning the nation’s particular cooperative positions for supremacy values (185). As a result, both nations are under increasing pressure to participate in discussions that would avert the trade wars. Both nations bear a varied set of demands. For instance, the United States demands that China enhance the importation of American products and cease from requesting American companies to present their intellectual property rights to facilitate trading activities in China. However, China is unwilling to give in to the demands, signifying the ensuing trade wars between the two countries. The rising conflicts are likely to cause fresh geopolitical confrontations and a lifelong global downturn. The research paper seeks to assess the theory on tariffs and the impacts of the trade wars on the global economy.
Economic Theory on Tariffs
Tariffs are levies enforced by a nation making imports extra expensive. According to Qiu, there are two types of tariffs (149). They include specific tariffs that are mainly enforced as fixed rates on specific commodities. Second, the advalorem tariffs enforced as the percentage value of a product. In most cases, tariffs are mainly enforced to impede or regulated importations by facilitating a surge in prices for services and products offered from another nation. This reduces the prospects of being obtained by domestic clients. Countries impose tariffs for various reasons. They include increasing income, exercising political superiority over a certain nation and safeguarding the local industry. Tariffs are likely to result in adversative economic implications, for instance, decreased competitiveness, tensions resulting in trade wars and increased prices for goods and services offered. Trade wars are likely to occur when one nation enforces protectionist guidelines over a certain nation. This is likely to result in bilateral tensions that would ultimately result in trade wars. In most cases, imposed tariffs act to compel other countries to give in to the pressures arising from trade corporations. Trade wars are treacherous as they do not destructively impact the economic development of both nations but their affiliation.
The predominant retaliatory tariff impositions between the two major universal economies is an indication of an impending trade war. Evidently, through the enforcement of several tariffs on various goods and services imported from China, it is certainly clear that President Trump’s administration took the initial step towards fuelling the prevailing trade wars (Chong 200). This extent, among others, sought to avert or reduce the importation of Chinese products. Consequently, China hit back to the protectionist guidelines by imposing different tariffs on goods from the United States. A continuation of the trend would mean that both administrations will also steer the trade war by enforcing limitations damaging to the universal economy. Thus, the trade war initiated by the two largest economies would go beyond meagre taxes to interrupt other nations’ global supply chain.
The existing trade-wars between the United States and China was initiated for political and economic aims. By mainly focusing on Hi-Tech Chinese products, the United States government appears to politically interrupt China’s flagship project. The sole aim of initiating the flagship project entails positioning China’s as the globe’s leading country about the integration of artificial intelligence and industrial manufacturing (Kwan 58). China is known to be dependent on technological inventions created by other nations. This critical aspect has been used to thrust the prevailing US-China trade wars as China is perceived to be inferior in safeguarding property rights of sectors integrated in key industrialized nations. According to Kwan, protectionist policies developed by China require the trading partners to surrender intellectual property and technology before investing in China (56). In addition, the Chinese administration is unwilling to expose the market to universal competition to protect the industries’ interests from foreign competitiveness. The strict and detrimental policies would increasingly result in harmful impacts on the global economy.
Trade War Impacts on the Economy
The ensuing US-China trade war and tariffs impositions certainly have an impact on both nations. Nonetheless, the Chinese economy would experience detrimental impacts compared to the United States economy. According to Qiu, the United States exports to China constitute approximately 8.4% of the net exports, while Chinese exports to the United States entail 20% of the net exports and 4.1% of China’s GDP (149). Products exported to the U.S. from China mainly consist of consumer products that may be exchanged. In contrast, goods from the U.S. primarily comprise high-end products, for instance, aircraft parts, automobiles and machinery. Most products are not easily interchanged, increasing China’s vulnerability to the adversative economic impacts of the trade wars. According to Liu, protectionist guidelines and tariff enforcement are believed to adversely impact the parties that are believed to safeguard (319). Based on a case scenario, the United States is known to enforce tariffs on steel exports, and as a result, China would retaliate by enforcing tariffs on consumer products. As a result, the prices would noticeably grow, negatively affecting clients that ought to be safeguarded. As the trade wars continue to intensify, the economies of both nations would be affected, subsequently being a threat to the global economy.
Similarly, the US-China trade might significantly have adversative impacts on the global economy. Since the United States boasts as the globe’s main purchaser of goods and services. Over the years, China has developed into becoming the globe’s chief exporter. Both economic giants account for approximately 40% of the world’s economy (Qiu 148). As such, the significant effect of the predominant US-China trade war would barely be undervalued as it may drag the global economy into a downturn. In general, this trade war bears the prospective of subverting the global economy, resulting in economic disparities that would primarily deter investment. Based on China’s trade framework, trading affiliates, for instance, Taiwan and South Korea, that mainly export intermediate raw materials and merchandizes to China, would be hardest hit by the trade war.
On the other hand, by providing another option to China, several countries are likely to profit from this trade war. As the bilateral trade war continues to develop, the U.S. may replace the trade dealings with China with other nations, for instance, Malaysia, Mexico, Canada, and Vietnam. Conversely, China could exchange U.S. imports with importations from Brazil, Canada, Japan, and additional European Union countries (Liu 325). This is likely to result in numerous inequities in the supply chains of the diverse republics, thus hurting the worldwide economy.
Conclusion
The U.S-China bilateral trade pressures started due to the United States abandoning its respective cooperative frameworks for supremacy ideologies. Even though the United States government seeks to progress its competitive edge over China by enforcing charges, the economic theory states that the tariffs would escalate the war between the nations. Strangely, because the United States and China are the globes chief economies, the ensuing consequence of the trade war would be a deterioration of the universal economy. Therefore, both administrations need to engage in discussions that would avert the trade war and the subsequent effects.
Works Cited
Chong, Terence Tai Leung, and Xiaoyang Li. “Understanding the China–U.S. trade war: causes, economic impact, and the worst-case scenario.” Economic and Political Studies 7.2 (2019): 185-202.
Kwan, Chi Hung. “The China–U.S. trade war: Deep‐rooted causes, shifting focus and uncertain prospects.” Asian Economic Policy Review 15.1 (2020): 55-72.
Lau, Lawrence J. “The China–U.S. trade war and future economic relations.” China and the World 2.02 (2019): 1950012.
Liu, Tao, and Wing Thye Woo. “Understanding the US-China trade war.” China Economic Journal 11.3 (2018): 319-340.
Qiu, Larry D., Chaoqun Zhan, and Xing Wei. “An analysis of the China–U.S. trade war through the lens of the trade literature.” Economic and Political Studies 7.2 (2019): 148-168.