U.S – China Trade War Explained

Two of the world’s largest economies, the United States of America and China have now officially locked horns with the emerging trade war between both the countries.

Introduction

It all began with America’s President Trump imposing trade tariffs on various Chinese goods as he firmly believed that China was responsible for the downfall of America’s economy. The U.S intends to counter Chinese trade policies such as state subsidies that makes it difficult for U.S organizations to compete against the Chinese by imposing high taxes on Chinese products that’ll result in cheaper U.S origin goods within the nation.

Goods involved

On the American side, the goods that will be slapped with extremely high tariff rates fall under a broad range of 279 product categories, which includes plastics, semiconductors, chemicals, fridges and Railway equipment. In retaliation to the above, the Chinese have a long list of 333 U.S tariffed product categories which includes, Coal, Fuel, medical equipment, buses, and copper scrap.

Goods

The U.S intends to keep the war going and will soon hit back with more product categories and higher tariff rates. Items such as bikes, animal medicine, and baby cots could be charged a 25% levy that is double the 10% planned initially. And to this, China is to respond with another tariff on $60bn of American goods.

Side-Effects of the Trade War on the U.S

Though the tariffs on Chinese products intend to secure American industries and businesses, popular opinion amongst industrialists and businesspeople is that this move by the U.S government has set out to harm their interests. The main concern is the Chinese’s retaliation that’s making U.S products far more expensive and subsequently reducing its demand. On the other hand, businesses within the U.S that rely on Chinese imports are also affected as the tariffs imposed by the U.S on these goods are making them expensive for the customers in the U.S.

Most economists worry that this trade war could result in the destruction of America’s economy and loss of jobs and possible bankruptcy of America’s small businesses.

Side Effects of the Trade War on China

The impact of this trade war on China is far more significant than the effect on the U.S as the Chinese exports to the U.S is multifold that of the U.S exports to China. Therefore, the Chinese have a shorter list of goods to increase tariffs on as compared to the U.S.

However, China has a Plan B as well. China plans to make life harder for the U.S do to set up business in China, by increasing the amount and cost of red tape.

Side-Effects of the Trade War in other parts of the world

The U.S increasing tariffs on Chinese products has a significant impact on other support manufacturing countries such as Malaysia, Indonesia, and Singapore. And this tit for tat between the U.S and China will lead to a 0.5% fall in Global Growth by 2020.

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