The Effects of Trade War between China and the United States of America

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The Effects of Trade War between China and the United States of America
Before 2001, the Chinese economy was not seen as a threat by the U.S., and this is mainly because China was not a member of the World Trade Organization (WTO). However, in 2001, China joined WTO and its growth ballooned since it was export-dependent. The Chinese economy went from being a tenth of the U.S. GDP or “12 percent in 2000 to over 40 percent in 2010” (Steinbock, 518). With such growth, the Chinese economy was projected to surpass the U.S. in the 2020s. However, the U.S. has been the world’s superpower for decades, and losing its hold as the strongest economy would put its position at risk. So, it came as no surprise when U.S. protectionism measures led to President Trump’s administration starting a tariff war with China. Even before President Trump won the presidency in 2016, his sentiments were clear, especially toward China and how the U.S. trade deficit with China put the latter at an advantage. One could tell that a trade war was coming long before President Trump assumed power. His resolve to “cut a better deal with China that helps American businesses and workers compete” was quite evident days after he was inaugurated (Hass and Denmark). However, his resolve never factored in China’s retaliatory strategies that soon meant that the two largest economies of the world were involved in a trade war. This trade war has greatly impacted the economies of these two countries. Furthermore, other countries have also found themselves affected by the war as the leaders of both countries appear unmoved by the ramifications of the war. Provided herein is an analysis of the effects of the U.S.-China trade war on both countries as well as the global economy.
Effects on the U.S. and China
Both U.S. and Chinese economies have suffered greatly from the trade war. The trade war has had a major impact on employment in both countries. In the U.S., Zandi, Rogers, and Cosma (2) report that the war has “cost an estimated 0.3 percentage point in U.S. real GDP and almost 300,000 jobs.” The above has been the case mainly because it is the U.S. importers who have been forced to bear the brunt of the trade war. After assessing data since the trade war started, Amiti, Redding, and Weinstein (2) concluded that U.S. importers have had to incur the cost of the tariffs, which Shalal (np) estimated to be around $46 billion. With such a cost in mind, the U.S. companies have had to accept a season that was dominated with lower profits, which in turn impacted investment, wages, and jobs mainly because of downsizing efforts. Farmers are a good example of the lot that has suffered a great deal from the trade war because they reportedly lost a big part of what used to be a “$24 billion market in China” (Lane and Gangitano).
In China, jobs have also been at risk, especially in the industries that have been affected by the tariffs imposed by the Trump administration. According to Bovino and Roache (np), the Chinese manufacturing investment has been greatly affected by the trade war, especially sectors that are directly exposed to the U.S.-imposed tariffs. These s...