Month: February 2019

US-China Trade War

Published by walkern8

US-China Trade War

 

In September 2018, President Trump imposed tariffs of 10% on billions of dollars of Chinese goods. These tariffs limit the amount of imports from China into our country, making it more feasible to produce products domestically. Another purpose of a tariff is to increase revenue for our government. The people who pay for these tariffs are retailers that import these products from China. The only option for retailers is to increase the prices of their goods or to take a hit on their profits. For example, a 10% tariff on a $20 item, would drop a profit $2. Now multiply that by how many of these items a retailer receives, it can get kind of hefty. If a retailer doesn’t want to take this kind of hit to their profits, then they will increase prices and the hit is now taken on by everyday shoppers. These kinds of numbers can have huge effects on our economy, positive and negative. This turns into a trade war as China feels the effects of tariffs on their products. In response to our President’s actions, China imposed retaliatory tariffs of their own on American goods. I am interested in this topic because this is an issue that we are all affected by. Although it may have some positive impacts on the economy, we will still feel pressure of increased prices and tensions over seas. These kinds of issues are building blocks that can act as a domino effect to tensions over seas and bigger issues.

Image result for us trade war with china

         The European Union (EU) are the largest traders in the world and they strictly follow the World Trade Organization’s rules. The European Union imports to over 100 countries and has the largest single market area. They support the simplified system and it is large reason why they are so successful. Another thing that makes the EU so successful in trading is their free trade agreements. Part of the European Union’s trade policies are their strive to limit their effects on other global issues. These issues range from labor issues to environmental issues. When trading with countries of less wealth the EU joins their trade with development, increasing trade-led growth.

Ecuadorian imports rely heavily on the United States. The U.S. are the biggest exporters of Ecuadorian goods and the U.S. produce the most imports to Ecuador. Ecuador specializes in oil, banana, and coffee exports and mainly require vehicles and medicine as imports. Ecuador tax most all imports in groups. Firearms, tobacco, video games, and perfume are group one which range from 300% to 20%. Group 2 is comprised of vehicles ranging from a 35% tax to a 2% tax. Group 3 and 4 are miscellaneous items around 35% tax and group 5 is made up of beer (75%) and soda (10%).

The US was a strong supporter in establishing the World Trade Organization in 1995. Now in 2019, President Trump insists on differing from the path that some many followed us on. Unlike the EU, the US is on a bumpy road down the trade path of protectionism and nationalism. Trump neglected to confront to WTO on his 25% tariff on steel and aluminum, and his 10% tariff on half of Chinese imports. Maybe Trump’s decisions weren’t all a bad thing? It did expose the lack of rules and broken system of the WTO. But one thing for sure is the rising tensions between the US and those who voiced their opinions against Trump’s tariffs, like Mexico, Canada, and the EU. This brings us the effect of smaller countries like Ecuador. The tariffs that Trump has made may not produce a financial burden on countries like Ecuador, who count on the US for imports and exports, but it does strike fear into those countries. These countries may be too afraid to express their opinions on Trump’s tariffs as it seems too easy for him to propose the tariffs. If Trump was to elect tariffs on those countries trades it could cripple their economies. For example, the EU conducts trade with development for the small under developed countries they trade with. What if the US were to go along these lines? Although, it seems those have enough of their own taxes…

Image result for tensions in wto

         As Trump has surfaced, the WTO has some serious problems. But also, Trump has some serious problems. First off, the 25% tariff on steel and aluminum negatively affects car companies in the US. OWorld Trade Organization’sne of the main reasons for these tariffs was to increase jobs, but I believe this tariff is anything but positive. Now onto the issue of the 10% tariff on Chinese products, I also believe there is a better way to approach these issues. Maybe a solution that doesn’t involve increasing tensions between multiple countries? Do I know of a solution? No. One thing we know for sure is that fixing the problems in the WTO is going to take a long time.

 

Citations:

Pictures:

  • Blazyte, Agne, et al. “Infographic: U.S. Trade Deficit with China Grows as the Trade War Heats Up.” Statista, Statista, 12 Sept. 2018, www.statista.com/chart/15419/the-us-trade-balance-with-china/.
  • Fury over Alleged Toxic Leaks in North Mara Gold Mine, www.ippmedia.com/en/business/rising-global-trade-tensions-threat-african-economies-wto.