China v/s America :- The Money Wars

The Youth's Lens
Jul 14, 2018
2 min read

An analysis of the recent trade wars between China and America by Rishika Jain.

Largest Trade War?

Last week, the Trump administration imposed tariffs on $34 billion worth of Chinese goods. China retaliated by imposing an equal 25% of tariffs on $34 billion worth of US goods. They accused the US of starting “the largest trade war in economic history to date.”

The US is expected to retaliate further and impose taxes on $16 billion worth of Chinese goods in two weeks. President Trump has said that, depending on how China responds to his tariffs, he’s considering hitting another $500 billion worth of Chinese goods.

But, why?

The point of this is to make Chinese goods more expensive so the demand shifts away from the Chinese goods and the Chinese businesses lose money.

The US is targeting high-tech Chinese goods to put economic pressure on Beijing’s “Made in China 2025” program — a Chinese government initiative to transform China into an advanced manufacturing powerhouse.

A senior Trump administration official said “We are ready for a trade war. If they want it we are ready to fight it. They need to remember America would win that so-called war, hands-down. Our market is bigger, our consumers richer – we are the global innovator. All we ask is for an even playing field from the Chinese. If they won’t agree to that, then they will have to deal with the consequences.”

Who will win?

The advantage is held by the US, because America imports much more from China than China imports from the U.S.

In fact, the U.S. was in a trade deficit with China, last year. Therefore, China risks losing out on $462 billion in goods and services that America imports from that nation.

The trade war is expected to affect not only the two nations but the global economy as well. This would raise costs for American Industries, perhaps threatening the manufacturing jobs that Trump wants to protect. The increased costs of production would ultimately affect the American Consumers, specially in the short term as they would struggle to find replacements for the current Chinese imports. This, in turn, may be advantageous for other exporting countries as there would be shift in the US demand.

Back in 2016, as a candidate running for election, Trump had addressed the trade deficit issue and spoken about his plans to work upon it. Now, we see this in action.

However, this situation could be worse, as the relationship that China and U.S. dwindles, the risk of war increases. (Both being two nuclear armed superpowers)

“History tells us that nations with divergent interests and competing geopolitical goals with enough proximity tend to clash. In fact, as Harvard Professor Graham Allison reminds us, in 12 out of 16 cases studies where a rising power competed with an established power (think China vs. America) – war was the result.’’

Bibliography and References

Written By Rishika Jain