The Risks Expected In Trading Steel between the U.S. and China Due To Political Tension between the Two Countries

The Risks Expected In Trading Steel between the U.S. and China Due To Political Tension between the Two Countries

The U.S.-China economic partnership has been currently facing various tensions.  Over the past years, the U.S. has made specific tough decisions against China. For instance, the U.S. has imposed tariffs on $ 250 billion worth of different Chinese imports, and the Republic of China also reacted by increasing the tariffs on U.S. exports as well (Autor et al.,2016). The leaders of the countries have tried to take political dimension to address the issues such as the unfavorable regulations regarding trading. The political structure may actually compromise the steel trading between the countries as some politicians may sort to using the issue for their political interests.

With the economic tensions between the two countries heightening, various risks are likely to be experienced by different companies dealing in multiple products such as trading in steel. The economics tension tends to have a significant impact on steel prices as a commodity and on the outlook of the steel manufacturing sector through an essential re-routing of trade flows in the case of steel trading and adverse effects on the international prices.

Even though uncertainty stays elevated amidst recurring durations of political tensions, which have resulted in some significant changes in tariffs that are actually applicable to steel products, the tension between the two countries is expected to stay the same for sometimes (Ghisellini et al.,2016). The risks in steel trading have remained a significant reason for the breaching of several trade laws and treaties. The risk in steel trading is critical, and when not effectively managed, the trading is expected to lose income and even the reputation of its steel products and thus is necessary to conduct risk assessment occasionally.

Some of the expected risks are stated below.

Strategic risk

The steel trading holds some strategic decisions when the steel industries try to make some of the decisions to make them thrive in the business. Still, some risks tend to emerge (Mancheri, 2015). Most of the decisions may be due to ever-changing business environment since the two countries are continually updating their regulations regarding steel trading, therefore impacting the business. When a poor strategic decision as arrived at, then some issues may be experienced by the steel industries such as inadequate cash flow, profit loss, inconsistent deadlines, and even low sales.

Technology risk

Technology risks are also expected in the steel trading as a result of cyber attack and malware since both the U.S. and China refuel to put in place a common rule governing the steel trading between the two countries. Therefore resulting in time loss via mismanagement of systems and breaching of data.

Compliance risk

The steel trading is governed by various regulations and legislation; the failure by either the U.S. or China to adhere to or formulate favorable regulations is expected to result in compliance risk and lading to unnecessary fines and even reputational harm for the steel trading sector.

Financial risks

The projected risk can also be a financial risk in which can be affected by certain external factors such as fluctuations in the financial markets of the two countries. The risk is likely to result in a loss of income and poor cash flow and may ultimately terminate steel trading.

In conclusion, the risk in steel trading is critical, and when not effectively managed, the trading is expected to lose income and even reputation of its steel products and thus is necessary to conduct risk assessment occasionally. By conducting risk assessment, the steel trading can pro-actively plan for any risk that may emerge as a result of the U.S. and China Political Tension.

References

Autor, D. H., Dorn, D., & Hanson, G. H. (2016). The China shock: Learning from labor-market adjustment to large changes in trade. Annual Review of Economics, 8, 205-240.

Ghisellini, P., Cialani, C., & Ulgiati, S. (2016). A review on circular economy: the expected transition to a balanced interplay of environmental and economic systems. Journal of Cleaner Production, 114, 11-32.

Mancheri, N. A. (2015). World trade in rare earth, Chinese export restrictions, and implications. Resources Policy, 46, 262-271.