WHAT IS THE EFFECT OF TRADE WAR BETWEEN AMERICA AND CHINA

Document Type:Research Paper

Subject Area:Politics

Document 1

China also decided to increase the tariffs on US products and services. The trade war between America and China is likely to sabotage the world’s economy. The United State has come with the suggestion to increase the tariffs for the imports from China, the increase in the duties is likely to increase the cost of phones in the USA. The trade war between the two countries is expected to affect them economically as both nations get significant revenue from the export of the smartphone. In return, China has threatened to increase tariffs of USA imports into the country2. The increase in the number of duties from both countries is likely to lead to the rise in the cost of the smartphones. Further, the increase in the price of the goods is expected to decrease the sales as the customers may not be willing to buy the imported smartphones which will be more expensive. China’s smartphones are the most used in the world brands like Apple and Samsung are manufactured in the nation thus when the tariffs are imposed by the USA government most of the phones sold in America are likely to cost even more as China will want to compensate for the high tariffs. If the duties treats are to take place, both countries will experience a change in their economic, social, political and regional environment. China gets most of its revenue for exporting smartphones. Handsets shipped to America make up to 1. of all China’s exports3. Uniquely, this may seem to be a small percentage, but it will affect China’s markets when the tariffs are increased.

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The China phone brand that is likely to be affected the most is the Huawei has it has invested a lot to sell its products in the USA market. Other brands such as Apple products will also be affected. Comparatively, because the Apple company makes its products in China due to the affordable labor it’s profits are to be affected by the new tariffs. The trade war between America and China will cause them to spend more on paying for duties as a result of the tariffs the China government has imposed on all American goods and services. The increased taxes on the company will reduce the amount of money the American government receives from companies located in other nations, and this will affect it GNP (Gross National Product) Since China is one of the primary suppliers of goods in America and the world America increase in tariffs of China’s products is likely to hurt America rather than on China; as China can supply to other nations apart from the USA4.

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Equally, this is because although exporting to America will cost more on China’s government, China can still earn more by exporting to other nations. Also, the tariffs are likely to affect the consumer market in America as China’s products will be more expensive to purchase and this will increase the cost of living. Consequently, they may reduce the salaries of the employees for them to compensate for the increased cost of production. Others may lay off their workers when the cost of production becomes too high. Equally, this would be harming the American companies Trump is trying to protect because the citizens will not be able to purchase products from the American companies due to lack of income. The trade war will decrease the ability of the American to invest; this is because they will be spending more on the purchase of goods that have high tariffs instead of saving the money for investment.

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Chiefly, this will have a long-term effect on the country. For one since China is known as the kitchen of the world, it can manufacture products at a lower price, unlike other nations that would produce the same product at a slightly higher cost8. The USA has announced up to $60millions on China’s exports into the country. The goods to be affected by the tariffs include information communication technology this includes smartphones, aerospace, and machinery. Trump, the President of the USA, has promised more taxes on another 1300 China’s products9. On the other hand, China has not be left behind in the tit for tat scheme, on receiving the news that the American government had put tariffs on its products it also did the same on American products. Unemployment would cause many countries not to grow and would affect their ability to provide its people with specific amenities11.

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Stakeholders of the companies to be affected would suffer a significant loss. Economist has also noticed that the threat of the trade war has led to the increase in borrowing and the decrease in stock prices. Moreover, this is one of the many adverse effects of any trade way. Reduction in the cost of stock will discourage investment as people don’t want to invest in a business that will give them loses. The economy of the world would be primarily affected, and the government would result in increasing the taxes so that it may get money to provide for the nation. Consequently, many people, especially in the third world nations, would have to live below the poverty line as the economy will be unstable due to lack of employment. The move of the American government to increase the tariffs of China’s products is a selfish one as Donald Trump want America to remain the largest producer in the world.

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With China defeating the Americans at this the government is trying to come up with ways to regain its position as the largest producer of customer goods in the world. Notably, American is targeting hi-tech manufactures to disrupt China’s industrial strategy which seeks to make China a manufacturing globally competitive by introducing automation and intelligence13. There is so much to lose. But trade wars will not make the situation better. Neither will it protect US technology or give American better access to China markets. Nor would it help China invest in America. A perennial Chinese complaint is that its firms are blocked, particularly in investing in the technology sector, which is crucial for its economic growth16. For this reason, the trade war needs to be avoided at whatever cost. The Negotiations The two nations have met to negotiate about the demands and the concession they want for them to back done from the trade war.

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But, the meetings have been futile as the US is demanding so much from China and the two are not will to give in to each other demands. Some of the requirements the United States ask for are that China strengthens its intellectual property rights, cut down its trade surplus by $100billion in 12 months and another $100 in the next financial year, accept USA restrictions on China’s investment on sensitive technology and many more. Like many negotiations, the negotiations between the two nations experienced many differences with China demanding that Beijing is involved in the talks19. Thus, the two nations need to come up with an agreement to avoid the adverse effects that come with a trade war. Some of which include unemployment, lack of infrastructure, and many more. The trade wars could also cause a negative relationship between the people of the two nations.

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Bibliography Bradsher, Keith. U. The Guardian. April 05, 2018. Accessed May 06, 2018. theguardian. com/commentisfree/2018/apr/05/us-china-trade-war-supply-chains-consumers. usatoday. com/story/money/nation-now/2018/04/06/trade-war-trump-us-china-tariffs/492616002/. Calamur, Krishnadev. China and the Cost of a Television. The Atlantic. Accessed May 06, 2018. forbes. com/sites/ralphjennings/2018/04/12/how-a-u-s-china-trade-war-might-raise-apple-and-huawei-smartphone-prices/#7ef34c1b7289.

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