The USA-China Trade War Mathematics & Economics Term Paper

The USA-China Trade War
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The USA-China Trade War
What is a trade war? How does it affect the economic growth of the countries involved? Is it beneficial both in the short and long-term performance of the economy? Is the trade war the best strategy to protect domestic industries from being overpowered by international corporations? These are some of the questions that will be answered in this paper. Proper evidence will be given to support the arguments made and where possible statistical data will be provided. In particular, a trade war occurs when a country imposes quotas or increases tariffs on imported goods, and the affected nations retaliate by increasing their duties as well. Indeed, its primary objective is for trade protectionism. For example, President Donald Trump increased tariffs from 10% to 25% in 2018 on imports from China. Besides, China responded by raising duties on American imports, which resulted in a trade war between the two countries. The United States of America (USA) and China have the largest economies in the world. As such, a trade war between these two economies affects the entire world. For instance, Trump encouraged Americans to use goods manufactured locally so that they can promote their domestic industries. Although the USA-China trade war’s primary purpose was to facilitate trade protectionism of American domestic industries, businesses in both countries are likely to suffer the most in the long-term since they depended on products and services from each other to operate smoothly.
A trade war entails an economic conflict that occurs due to the extreme protectionism of local industries between countries. The state creates or raise tariffs or introduce new trade barriers against one another as a retaliation strategy. In the scenario at hand, the USA raised tariffs on imports from China. Notably, China retaliated by increasing the duties of imports from the USA (Carvalho, Azevedo, & Massuquetti, 2019). Specifically, China is the largest producer of consumer goods globally. The country sells its products at lower prices than many of its competitors, such as the USA. Since customers are attracted to affordable and high-quality goods, Americans prefer to buy products from China as opposed to those produced locally since they are expensive. China’s competitive advantage in the international market is that it offers cheap and quality products. As a result, the nation has penetrated into many territories in the world, both developed and developing countries. The two primary reasons why Chinese products are cheap is because of the partially fixed exchange rate against the dollar and a low standard of living that allows domestic companies to pay low wages to their employees (Itakura, 2019). In reality, some of the largest American companies, such as Apple Inc., outsource their assembling services to Chinese technology firms. China has been known in the world to be the only country that produces affordable consumer goods. As such, the USA is bitter about the rising demand for Chinese products globally. In other words, China appears to be taking the economic position of the USA since some decades ago; the American products were the one...