Causes and Potential Effects of Trade War between the US and China

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Causes and Potential Effects of Trade War between the United States and China
Introduction
For the past three decades, America and China enjoyed trade relation without any side citing unfair treatment. At least that was the case until the United States president, Donald Trump, rattled that America was getting stiffed on trade. One of the main reasons for this attitude is due to the popularized slogan that the president used in his campaign, “America first.” Recently, the US president announced tariffs of 10% on imported Aluminum and 25% on imported steel. The president believed that the move would bring back the billions of dollars that are lost each year to other countries such as Mexico and China because of the US imports more than it exports. The move has triggered a trade war that could lead to other countries to retaliate among other potential effects. This paper will outline the cause and potential effects of the trade war between the United States and other countries, particularly China.
Causes
Lashing out at US Allies
There are two aspects involved in Trump’s trade-war policy. One is against action against United States’ allies such as Mexico, Canada, and the EU and the other stance is designed against China (Handley and Nuno 2741). However, it is essential to note that the two aspects are unique to each other. The action against the United States allies is driven by its conservative and traditional politics; political views that are also shared by his political advisors. It should be noted that president Trump had maintained the same political spirit even before he was elected to office in 2016 (Krugman). According to the right-wing nationalist perceptions about the world, there are no significant ties that can be attained from global trade. Thus, by imposing increased tariffs, the United States’ force other nations to readjust their deals without America losing any bargain. By increasing tariffs, the United States is obliging its allies to secure better deals for the US at the expense of others.
The right-wing nationalist perspective on the trade war is contrary to the consensus that promotes free trade in the United States dominated global order. The conservatives and the liberals have always shown their support for an open global system which is founded on the concept that everyone will eventually gain. The free long-time establishment consensus of free trade was designed to allow a more natural flow of capital around the world in search of lax environmental regulation, low taxes, and low-wage labor (Kotz). The increased tariffs have been discouraged by the liberal, but Trump remains adamant. It is worth noting that the US does not have sufficient privileges to impose an unfair set of rules on the rest of the world. Even before Trump decided to increase tariffs of steel and Aluminum, the average US tariff of 2.79 surpassed that of the major developed nations with trade relations with the United States such as EU countries (1.92 percent) and Canada (2.44 percent) (Kotz). Hence, the establishment of new tariffs that are offensive against Mexico, Canada, and the EU could lead to a global war, without a champion and significant economic damage to each nation.
Confronting China
The United States government, led by Donald Trump, feels that the country loses billions of dollars when trading with China and other nations. According to president Trump, China has been busking as the loss of the United States, suggesting the rapid growth of the Chinese economy is due to the tremendous gift from the US (Li et al. 1561). It is to be noted that a major brand from the United States with a considerable presence in China along with political analysts has strongly criticized the new tariffs posed against China. US companies in China have been making a huge profit in China, which may be adversely affected due to the new tariffs. Simultaneously, the big businesses support pressuring China to change its ways (Li et al. 1561). Their primary concern is about the approach that has been used by Trump’s administration. Instead, the multinationals applaud the need for the US and its allies to compel China to review its trade practices, a fruitful bargaining strategy that cannot be pursued to Trump’s decision to lash out on its allies by imposing higher tariffs.
Most US businesses have always felt opposed to Chinese trade practices. On the one hand, many US corporations have for a long time wanted to penetrate the Chinese market and have made huge profits after their entry. Some of the major companies that benefitted in the fiscal 2017 year include, Qualcomm receiving 65 percent of its revenue from China other US companies that gained revenue from China consist of Intel (23 percent) and Apple (20 percent). (Kotz) Thus, the willingness for such companies to see that the trade war minimizes. China implements a “developmental state policy,” used by the nation to set conditions that must be adhered to by other foreign nations that want to enter its market (Handley and Nuno 2767). According to Handley and Nuno, in the US, the government does not have the exclusive freedom to use its power to compel the Chinese government to allow US businesses to do whatever they want (2769). Hence, the mixed reactions between the US government and the US businesses.
Those that blame China for the trade war have cited interconnected charges. One of the main concerns shared by a Chinese critic is that China steals US technology. Also, there is the argument that China, through its “industrial policy” has gained the upper hand by funding and providing subsidies to certain domestic corporations (Handley and Nuno 2777). The Chinese government is accused of financing companies to steal technology from the United States. The industrial policy that is used in China aims at promoting industries in the future with some success. For instance, China has become the leading supplier of solar panel in the global marketplace. Another accusation is that China has many state-owned enterprises; some of the companies produce high-tech products that are sold on the world market through foreign direct investment and exports. For this reason, critics feel that enterprises that are owned by the Chinese government participate un...