As you walk down the aisle at your local grocery store you might start to notice that your usual 20 bucks don’t stretch as much as they use to. So, instead of consuming unnecessary goods you’ll simply buy what’s needed. Now you have a zero-tolerance budget on what you can spend and as prices go higher your consumption habits go down. That’s what tariffs do, they complicate your life, which, eventually, hits your country’s economy. What was meant to be a positive measure to increase national production, is, in reality, affecting medium size businesses, your wallet and the economy as a whole. The financial crisis that hit the world 10 years ago has created a growing disbelief towards current structures and is now feeding this monster called Populism, which fears globalisation and free markets. However, to go back to an isolated economy is pure ignorance, since it downplays how incredibly and irreversibly connected the world is.
It all started with solar panels and washing machines, when President Trump decided to begin 2018 with safeguard tariffs against imports from China (Bown and Kolb, 2018). From then it has only derailed, from an outside perspective it can be seen as a back and forth discussion that could potentially be resolved, but instead is threatening peoples’ livelihoods. In April The White House released a statement accusing China of stealing US’s intellectual property and threatened to impose tariffs on $50 billion imported Chinese products (The White house, 2018). On the next day China responds by publishing a list of $50 billion worth of American products that would have a tariff of 25% (Bown and Kolb, 2018). After this response, Trump wanted to add tariffs on $100 billion products and started a war with the world by imposing tariffs on steel (Bown and Kolb, 2018). All I can envision in my dizzy confused brain is two partners screaming at each other “Oh yeah Mister. Well, I’m going to do this. How do you like that!?” It ultimately ended with one partner screaming at the top of his lungs that he would take it to the extreme and charge a rate of 10% on $200 billion worth of products. Which would in January 2019 turn into 25%. Leaving the Chinese partner looking scared and astonished as he only had imposed tariffs on $60 billion worth of products (Bown and Kolb, 2018).
China in 2016 represented 7.97% of US’S total exports (WITS, 2018), while they represent 18.39% of China’s total exports (WITS, 2018). Therefore, there’s an unbalanced trade relationship. Besides, it’s a well-known fact that China never played by the rules. That is how they have achieved economic success. As the President of the US, you want to solve this. Nonetheless, by imposing tariffs you are only creating more damage. Other ways must be found and that is why global cooperation/negotiation are the key.
Backlash from these trade measures were especially felt by Soybeans producers, since China is the biggest consumer of Soybeans it made sense that their retaliation would tackle this $12 billion export. This affected deeply Midwestern farmers who saw their clients turning to Brazil as a supplier (Meyer, 2018). Tariffs started as a way to tackle US’s unemployment and increase the consumption of national products. Mr Trump needs to understand that production exceeds domestic consumption, which makes a large number of American producers rely on exports as their income. Furthermore, China has been used by the States to do finishing works to originally made America products, with tariffs it only increases its final costs. Leaving American producers/sellers to either take the hit of the costs, so that can stay competitive in the global market, or increase their products’ prices and loose competitiveness.
In the recent 2018 G20 meeting both Presidents agreed on a 90-day truce in which both countries will implement agreed measures and start an open discussion on their future economic relation (The White House, 2018). This deal brought some needed stabilisation. Nevertheless, it seems unlikely that this is the beginning of the end for this Trade War. Especially, after the ground-breaking news of Huawei’s CFO arrest in Canada on behalf of the US, only a few days after the deal (Financial Times, 2018). This added tension to an already fragile relation.
These pressures are constantly being reflected on stock markets through irregularities. After Huawei’s events the S&P 500 fell 2.3 %, its worst since March (Shellock, 2018). In the mists of all these disputes, the WTO has been receiving countries complains to investigate the US (Baschuk, 2018). This organisation can be the vehicle to handle such disputes that will always emerge, its importance cannot be underrated. Nevertheless, it’s in need of a reform to help strengthen its power (Capling and Higgott, 2009).
Trading conflicts between countries pose a threat to the global economic system. So, it’s everyone’s concern that this dispute finds its settlement. With globalisation at its finest and populism rising, uncertainties emerge on whether we’re at a regression point. Which is normal to happen after years of a sudden growth followed by an economic crisis which brought stagnation. There’s no doubt that this unsustainable capitalistic system in place is failing. The world desperately needs to innovate its establishments. But, returning to memory lanes won’t help. Instead, let us create new sustainable and global lanes.
Mariana Morgane- M00640526
Martinez Monsivais, P. (2018) President Donald Trump with China’s President Xi Jinping during their bilateral meeting at the G20 Summit, in Buenos Aires, Argentina on Dec. 1, 2018. Available at: https://www.rollingstone.com/politics/politics-news/trump-china-trade-deal-762420/ (Accessed/downloaded: 7 December).
Bown, C; Kolb, M. (2018) ‘Trump’s Trade War Timeline: An Up-to-Date Guide’, PIIE, 1 December. Available at https://piie.com/blogs/trade-investment-policy-watch/trump-trade-war-china-date-guide (Accessed: 7 December).
The White House (2018) Statement from President Donald J. Trump on Additional Proposed Section 301 Remedies. Available at: https://www.whitehouse.gov/briefings-statements/statement-president-donald-j-trump-additional-proposed-section-301-remedies/ (Accessed: 7 December).
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CNN BUSINESS (2018) Explaining a US-China ‘trade war’ with soybeans. Available at: https://www.youtube.com/watch?v=00cCDWzU6UI (Accessed: 7 December).
Meyer, G. (2018) ‘Chinese importers resume purchases of US soybeans’, Financial Times, 13 December. Available at: https://www.ft.com/content/f418b1ea-fe6d-11e8-aebf-99e208d3e521 (Accessed: 13 December).
Shellock, D. (2018) ‘Trade war concerns keep US stocks under pressure’, Financial Times, 7 December. Available at: https://www.ft.com/content/2cda1c8a-f9be-11e8-8b7c-6fa24bd5409c (Accessed: 10 December).
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Baschuk, B. (2018) ‘Europe, U.S. Escalate Trade War with New Disputes at the WTO’, Bloomberg, 18 October. Available at: https://www.bloomberg.com/news/articles/2018-10-18/wto-members-request-an-investigation-into-trump-s-metal-tariffs (Accessed: 7 December).
Capling, A, Higgott, R. (2009) ‘The future of the multilateral trade system: what role for the World Trade Organization? Global Governance, vol. 15, no. 3, p. 313-326. Available at: https://heinonline.org/HOL/Page?collection=journals&handle=hein.journals/glogo15&id=319&men_tab=srchresults (Accessed: 7 December).