Effects of the US-China Trade War on Trade Balances

Effects of the US-China Trade War on Trade Balances
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Effects of the US-China Trade War on Trade Balances
The United States is one of the most developed nations in the world. Since gaining its independence over 200 years ago, the country continues to overcome a myriad of challenges and take advantage of different opportunities to cement its position as a global superpower. Over the years, the U.S., under the tutelage of different leaders, has been very strategic in its trade activities with countries not only within its borders, such as Canada but also those situated on far ends of the globe, such as China. Particularly, the U.S. has since World War II sort to promote and of enhancing its economic growth and competitiveness through reducing barriers to global trade and investment. The U.S., through its trade policy, has also been keen on the promotion of an open and transparent rules-based trading system. Through international trade, the U.S. manages to export products and services in which it possesses a higher and relative comparative advantage in the form of skills or resources and consequently, imports those that are inefficiently produced and unavailable in the region. These consultative efforts have seen the U.S. grow to become the largest economy in the world. Similarly, they have positioned the country as a popular destination for foreign direct investment. Some of the country's top trading partners include Canada, China, Japan, and the U.K. The U.S. Census Bureau ranks all these nations below the U.S. in terms of total trade in goods. Over the recent past, the U.S. has imposed harsh and stringent trade agreements that have adversely impacted the rankings of its trade partners and their balances. Some of these countries that have been greatly affected include China. The research paper examines in-depth the impacts of trade agreements and tariffs imposed by the U.S. since 2018 on China and highlight some of the causative factors behind the shift in the trade balances.
Analysis of U.S. Trade in Goods with China
The United States and China have been engaged in trading activities for many generations. The U.S. has, over the years, export products and services it harbors relative comparative advantage and, on the other hand, imports those that are inadequately and inefficiently produced and available in the country. It is estimated that the complex economic relationship between China and the U.S. started in the late 1970s when the two great nations signed a bilateral agreement to reestablish their diplomatic relations. Trade-in goods between the two nations grew rapidly since that period, from about $4 billion in terms of exports and imports to over $600 billion in 2017 (Ustr.gov, 2020). During that period, China's exports to the U.S. have transitioned from low-value products to adversely capital-intensive commodities. The Asian country is a major supplier of advanced technology to the U.S. and which is a highly demanded resource in the current global dynamics. Nonetheless, the trade deficit between the two countries has grown immensely over the years, with the U.S. importing more from China than it is actually exporting.
According to figure 1 below, the trade deficit between Ch...