Research Paper on China-US Trade War: Unfair Trading Activities & Tariff Barriers

Introduction

China and the U.S., which operate as the leading economies in contemporary world are currently engaged in a trade war (Carvalho, Azevedo, & Massuquetti 5). The war, believed to have been initiated by the current United States President, Donald Trump, has been marked by key trade barriers such as increasing tariffs. These barriers aim at compelling China to change its unfair trading activities, including theft of intellectual property rights and the increase in Unites States' trade deficits. The U.S also accuses China for forceful transfer of its technology to benefit the Chine at the expense of the Americans (Amadeo 1; Reiff 1). Therefore, this paper provides a comprehensive analysis of trade war between the two countries in terms of its origin, reasons for initiation, reasons for putting in place the associated new policy, and its corresponding effects.

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Analysis of the Trade War

According to Swanson, the ongoing trade war between the U.S and China provides the best example of detrimental trade wars in contemporary society (1). The war, which began approaximately three years ago, was officially initiated by the current United States President, Donald Trump. The two global largest economies continue to impose tariffs on billions of dollars generated by the goods and services exchanged between the two countries in terms of exports and imports. President Trump has continuously accused China of engaging in unjust trade practices. Therefore, the main reason behind his initiation of the trade war is to address China's negative trading activities and ensuring that she participates in fair trade (Carvalho, Azevedo, & Massuquetti 7) Consequently, President Trump introduced several tariffs policy seeking to deliberately compel China to remain accountable for its unfair trading activities and permanently refrain from such practices in the long-run.

According to Simon, Fujikawa, and Hannon, President Trump's tariffs policy is put in place to encourage consumers across the world to purchase goods from the United States by making imported goods from China more expensive (1). The U.S has imposed tariffs exceeding $360 billion on Chinese products and services. On the other hand, China has reiterated by imposing tariffs exceeding $110 billion on U.S goods. Washington imposed a total of three different tariffs in 2018 with the fourth one coming in September. The United States declare a 10% tariff on $200 billion generated from Chinese products. The new declaration, whose implementation begun in September 24, 2018 rose to 25% by the end of 2018 but was officially enacted in May 2019 (Amadeo 1; Reiff 1). This war affects the U.S businesses in different ways.

First, the war between China impacts U.S businesses by reducing their annual sales, revenues, and profitability (Simon, Fujikawa, and Hannon 1). According to President Trump, China is increasingly filling the U.S market with cheap and cost-effective products that are increasingly consumed by Americans and in turn refraining from their own businesses. Secondly, American businesses are considering the need to exit the market due to stiff competition created by goods imported from China. Thirdly, the alleged theft of intellectual property from American businesses impacts them by tarnishing their corporate image and reputation and in turn scaring away potential investors. Lastly, American business suffers heavily from the inherent forced transfer of their technology to China. This technological transfer affects American businesses' ability to manufacture and produce high quality goods and services with the capacity to meet customers' needs and expectations (Carvalho, Azevedo, & Massuquetti 11). Therefore, Chinese businesses continue to grow at the expense of the American rivals.

According to Swanson, there are different American industries affected by the current trade conflict between the U.S and China (1). First, the automotive industry receives the biggest share of the detrimental effects associated with the ongoing conflicts. For instance, China retaliated to U.S tariffs in 2018 by increasing the amount of tariffs charged on all U.S. manufactured vehicles entering its market from 15% to 40% (Simon, Fujikawa, and Hannon 1). This tariff increase increased the annual sales volume, revenues, and profits generated by U.S automakers, such as Tesla Inc. Secondly, the U.S technology industry is also vulnerable to the effects of the trade war (Amadeo 1). Companies that manufacture electronics such as Apple Inc, Intel Corporation, and Micron Technology continue to suffer from losses due declining demand in their products in China. Lastly, the trade war affects the U.S agricultural industry as China, which is the main market for its products continue to decline. Agricultural products exported to China include soybeans, cotton hides & skins, coarse grains, alongside pork and its related produces. Lastly, these trade conflicts culminate into reduction in American jobs (Carvalho, Azevedo, & Massuquetti 20). Many companies are increasingly laying-off workers due to a reduction in the demand of their products as many Chinese consumers shift to their substitutes.

Conclusion

The ongoing trade war between China and the U.S. has a far reaching impact on the two nations. However, the effects are more pronounced in the United States when compared to China. The conflicts began approaximately three years ago but became more pronounced in 2018 as Trump implemented a tariffs policy to ensure that China engages in fair and justified trading activities. Conversely, numerous United States' industries, including technology, agriculture, and automotive have recorded massive effects following the initiation of these trade conflicts. Therefore, there is need for the two countries to develop integrated strategies to resolve this predicament.

Works Cited

Amadeo, Kimberly. US Trade Deficit With China and Why It's So High. The Balance, June 2019. https://www.thebalance.com/u-s-china-trade-deficit-causes-effects-and-solutions-3306277. Accessed 29 September 2019.

Carvalho, Monique, Azevedo, Andre, and Massuquetti, Angelica. Emerging Countries and the Effects of the Trade War between US and China. Economies, Vol. 7, no. 45, 2018, 1-21.

Reiff, Nathan. The Top 3 Industries Affected by the Trade War with China. Investopedia, June 2019. https://www.investopedia.com/industries-most-likely-to-be-impacted-by-trade-disputes-with-china-in-2019-4580508. Accessed 29 September 2019.

Simon, Ruth, Fujikawa, Megumi, and Hannon, Paul. U.S.-China Trade War's Global Impact Grows. The Wall Street Journal, September 2019. https://www.investopedia.com/industries-most-likely-to-be-impacted-by-trade-disputes-with-china-in-2019-4580508. Accessed 29 September 2019.

Swanson, Anna. As Trump Escalates Trade War, U.S. and China Move Further Apart With No End in Sight. The New York Times, September 2019. https://www.nytimes.com/2019/09/01/world/asia/trump-trade-war-china.html. Accessed September 2019.