In my opinion, the most critical issue of our time is the prevailing trade wars between the economic super powers of China and the US. Economic tussles between the US and China have led to trade wars. Trade wars between America and China is reminiscent of the Embargo Act of 1807 that was signed by President Thomas Jefferson to prohibit the American ships from trading with foreign ports and Britain in 89/563 particular. The Embargo Act did not anticipate the economic consequences of its application, but just two year later into its application, the effects were apparent, and the victims were the American middle and low class earner citizens. A year into the enactment of the Embargo Act, trade activities declined significantly, leading to bitter protests by trade-dependent states like the New England Commercial Centers. The people felt that their government had betrayed them by using political enmity to strangle economic benefits for its citizens. The faith in their government dropped, and ultimately, the United States reassessed the situation and revoked the act in 1809. Fast forward to our current economic times: Trade wars are inevitable but the US and China are using them to make economic statements and claim political and economic superiority. The victims are the middle class consumers and low income earners and businessmen who suffer the imposition of tariffs and quotas on imported goods. The US and China are ostensibly blinding themselves from the importance of international trade and healthy foreign relations. I nternational trades enable consumers to enjoy a variety of goods, gain employments, raise their living standards and enhance international cohesion. The trade wars between China and the US will continue until both parties reach an agreement that satisfies both of them, and in the long run, China will benefit from the war.
The trade wars will continue until both US and China reach an agreement through the intervention of the World Trade Organization (WTO). According to Noack (2018) the WTO has the mandate to solve all trade disputes in the world. Noack quips that between 1995 and 2015, almost half of all the 500 trade disputes tendered to the tables of the WTO have been resolved without litigations. These figures show that WTO prefers conflicting nations to resolve their disputes amicably in time to avoid much economic consequences. China has since tabled a complaint against the US for unfair imposition of tariffs and quotas. Trump has been resistant to respond to the complaint and in doing so, he has undermined the legitimacy of the WTO in being an arbitrator of world trade disputes (Noack, 2018). Despite this lackluster, China and the US have no option but to meet and discuss a solution. If they choose to hold their pride, then the victims of the economic war will continue suffering.
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The beneficiary of the trade wars will be the Chinese. The trade wars have affected the US companies and if they persist, the rates of job losses in most sectors are likely to increase. On the other hand, China is said to be holding on fairly due to its vast global market base with the US taking less than 30% of their imports (The Economist, 2019). The US has stood as the world’s largest importer for decades and when they opened up their markets to the Chinese in 2000, China took advantage of the deficit of products and created a system of almost complete dependence of the US manufacturers to their products. Over $200 billion worth of goods have been affected by the 15% tariff imposition on steel and aluminum and the 25% tariff on industrially technologically significant goods (Liu et al., 2019). As a consequence, manufacturers have been forced to either transfer the increased cumulative costs to their consumers, reduce manufacturing due to high costs of capital or cease production till the economic environment is favorable. The consumers on the other hand have reported that when the prices of secondary products hike, they may opt to forego secondary needs like tariffs and extravagant holiday spending and focus on satisfying their utility bills alongside other basic needs (Chong et al, 2019). The shift of attention to purchase primary good only will make secondary goods consumption low and their manufacturers may not be able to sustain manufacturing, coupled by the high costs of wages and capital goods. The Chinese will benefit because it has made US dependent on its cheap goods and as such, many US industries like Apple rely on Chinese engineering and competence for business advancement (Li et al, 2018). China has a global market and the US market, when constrained, will only scathe its economic power. A long term trade war will frustrate the US more than it will stress China.
In conclusion, the trade wars between China and the US will have severe consequences on both states in the long run but more so to the US. Already, the cost of basic necessities is increasing, stretching the wallets of ordinary consumers. Consumer goods affected by the trade wars has risen greatly. Secondary goods are given secondary consideration since their cost has also risen since the wars began. US traders are contemplating cancelling their overseas orders since they are uncertain if their consumers may meet their new prices. Manufacturers are laying off workers, citing inability to sustain production and the populace’s perceptions about the benefits of the trade wars are shifting. More and more voters are also introspecting the fruitfulness of the execution of the Trump Administration Trade Policies and they are confident that they might review their choice of candidate in the coming election.
References
Chong, T., & Li, X. (2019). Understanding the China–US trade war: causes, economic impact, and the worst-case scenario. Economic And Political Studies , 7 (2), 185-202.
Li, C., He, C., & Lin, C. (2018). Economic Impacts of the Possible China–US Trade War. Emerging Markets Finance And Trade , 54 (7), 1557-1577.
Liu, T., & Woo, W. (2018). Understanding the U.S.-China Trade War. China Economic Journal , 11 (3), 319-340.
Noack, R. (2018, April 5). How trade wars end and why Trump’s will be different . Retrieved from The Washington Post: https://www.washingtonpost.com/news/worldviews/wp/2018/04/04/how-trade-wars-end-and-why-trumps-will-be-different/
The Economist. ( 2019, Oct. 27). Collateral damage: U.S. consumers worry about impact of trade wars on their wallets . Retrieved from The Economist: http://tradewarimpact.economist.com/collateral-damage-us-consumers/
