IMPACT OF TRADE WAR BETWEEN USA AND CHINA

IMPACT OF TRADE WAR BETWEEN USA AND CHINA

For the past two years, The United States of America and The Republic of China have been at war. A war that has had the two giants cross horns in matters trade. All this began in 2018 when the United States President Donald Trump imposed 10% tariffs on 300 million dollars’ worth of Chinese goods. These include foot ware, electronics, and toys. China then retaliated by imposing 10% tariffs on the USA goods. The latest taxes levied by the USA onto China’s imports are at 15%. The trade war has, over the years, resulting in adverse effects on the two economies as well as other nations that have experienced the collateral damage of the war. The trade war has dampened investment sentiment and consumer confidence among producers and businesses in China, brewing uncertainty since no company knows what to expect. Timothy Heath, The Senior International Defence Researcher RAND cooperation, believes that the lack of de-escalation it the war and the inability of both nations to solve the disputes is unsettling.

Multiple businesses have felt the ripples across the proverbial economy stream—the feeling registered by the individuals involved in activities whose very way of living gets threatened. Worried business people in China and The USA who depend on goods from either powerhouse are uncertain about the future of their businesses. In the USA last year, as the festive season approached, the owner of a gift and toy store was concerned about their stock and how they would get goods for sale after the USA imposed the tariffs on China goods. The citizens of the USA will, in turn, have to pay more for the same toys. According to CAN news, the USA further levied a 25% tariff on China’s goods as punishment for failing to meet the trade terms. These included agricultural products and painkillers: Fentanyl that president Trump blamed for the opioid crisis in the USA. China then felt that it is only fair to repay tit with tat. They wrote tariffs on 75million dollars’ worth US goods.

The trade has further brought with it offsprings of this dispute. A technological war has revealed itself with the two nations comparing arsenal. For many years the USA has been involved with the number one when it comes to technological advancements. The superpower is at the front-line of the charge towards improved technology and the perks that come with it spearheading the infantry of continents into an advanced future. This is not the case recently, however. China has put a foot on the competition challenging the big dogs. The Huawei brand has been at the forefront of this revolution providing technological support, including software and hardware solution for matters arising. After an order from POTUS to all US-based companies to cease operation and leave China, Huawei has been forced to stand alone. Restrictions placed on US technologies, including Google, Intel, and QUALCOMM have incurred Huawei brand a 10 billion revenue loss.

The attempt by the US government to cripple the rapidly accelerating number two have, however, failed after Huawei announced an independent Operating system in the future that will compete against Android. The operating system is said to cause a digital divide termed DIGITAL IRON CURTAIN, possibly. The Chinese, according to CNA news, have been using WeChat instead of WhatsApp and an older version of twitter. According to various financial analysts, the attempts by the USA to prevent the rise of China will be futile and have been termed too late. The fact that there are attempts to suppress them has been a constant motivator to the Asian giant and propels them further and pressures the need for new and improved technology.

The USA does not, however, have full leverage on China. China possesses the number one supply of rare earth, dominating 70% of the world’s amount. These are piles of land that have been used over the years by apple (a USA owned company) to make iPhones. Moreover, the rare earth is vital for Military strategies, electric car motors, Satellite, Tv motors, and lasers. According to CNA news, the tension currently being experienced could lead to a block sale of earth elements to the USA. This happened last to Japan in 2010 after the nations had territorial disputes over the Senkaku Islands. The Co-Chair at MP Material insists that any disruption in the supply of earth elements to the company will cause the US technological world’s losses. The United States of America will, therefore, find it hard to do away with China, so it would be better to deal with the disputes rather than sweep them under the mat, and the result is multiple casualties.

The Rivalry between the USA and China reflects an unusually shaky relationship between the two heads of state President Donald Trump and President Xi Jinping. Both of then having different opinions and having no desire to sort their grievances. The resulting restrictions by the USA on China have led to a Huawei trade ban in the USA, tighter visa controls for Chinese students in the USA, and persistent demand for China to change its stand. President Trump’s order to Apple for them to leave China has resulted in mixed feelings. Asia has a lot of countries, most of which have an understanding of Apple. The withdrawal of Apple will cause mixed reactions with Asian countries being forced to choose between the USA and China. This will cause economic losses and limit trade and economic growth. The result of this will be a technology war termed as a “Bipolar world” splitting the USA and China and dividing Asia.

The USA and China need each other, and it’s up to the governments to solve their differences for the sake of the entire world. China has, for long, been nicknames ‘The copycat of nations’ for its lower quality available goods that for decades flooded the market and served as cheaper alternatives. Recently, they have redeemed their reputation and are market leaders as far as technology is concern. China has the Made in China 2025 Initiative that threatens the USA propelling China’s hopes for becoming more dominant. Like the long match in 1949, there is another happening in 2020 where China put 75million tariffs of USA goods, and the USA ordered the withdrawal of USA companies out of China. The order, however, saw most of the companies redistribute into South Asian, India and Africa. Now a possible recession is cooking for both countries and the world economy.

The Trade war has brought with it various challenges for both countries’ citizens and the entire world. In my opinion, China is on a steady rise and will eventually become a superpower despite the USA’s efforts to suppress them. I believe that what happens now lies in the hands of the two heads of state. Instead of knocking heads and locking horns, the two Presidents should have a sitting and put down better laws for the future prosperity of both economies and the global market. In my opinion, none of the two has the upper hand because both those countries have something to lose. In conclusion, there is a need for a better dispute resolution method that a two sides tug of war with both teams having equal chances and the more significant ‘slice.’

Reference:

Kirkpatrick, K. (2019). Electronics need rare earths.

Fetzer, T., & Schwarz, C. (2019). Tariffs and politics: evidence from Trump’s trade wars.