Tariff on Chinese Imports by USA leading to Global Trade War

Posted in Finance Articles, Total Reads: 440 , Published on 19 September 2018
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USA and China are the two most powerful global economies when it comes to trade. US has some of the leading industries like technology, agriculture, retail etc whereas China is a leader in electronics, automobiles etc. These economic giants have a large say in how the global share market and businesses function. However, lately USA has decided to have a a tariff on more than $200 billion imported goods from China. This could have large scale impact not only in the two countries but global markets.


USA has decided to pursue the “America First” strategy. The main objective behind this is to have more jobs created within USA by motivating local businesses to flourish. Local manufacturers and businesses have immense competition from cheaper imports especially from China. Thus unless locally made products are given preference or an advantage, it is difficult to compete with Chinese prices. Keeping this in mind US has decided to have tariffs or taxes on roughly $200Bn goods which are imported from China. This would help local businesses in USA to thrive.


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All these goods would be taxed 10-25% extra as imported goods tariff. Thus making these goods more expensive in the USA and declining imports. This would then enable local American businesses to increase their sales as the competition from imported Chinese products would be restricted. The main reason why US has taken this bold step is because that the trade deficit gap between the two countries is increasing. Over the years US imports from China have been exceeding their exports year on year. Because of this Chinese products have been flourishing in America at the cost of locally manufactured goods.


There are several Chinese imported products which would be facing additional tariffs by the US. Aircrafts, electronics, computers, clothing etc from China would be taxed approx 5% extra. Food and beverage products like meat, wheat etc would also be charged an extra 10%. It is estimated that more than 6000 imported Chinese products would be charged an additional tariff under this scenario. This means than more than 50% of the $500Bn Chinese imports to US would fall under this additional taxation. This would greatly create an imbalance between the trade relations between the two economic giants. On the other hand, China imports close to $130Bn goods from the US, out of which 50% would be under the radar by China.


However, there could be serious repercussions of the same. Firstly, as a counter measure, China would be imposing tariffs on goods imported from USA worth $60 Bn. This would directly affects the export business of America. Apart from China, other Asian economies would also become skeptical with this attitude of US and could well hamper the trade relations between America and rest of the world.


The immediate impact in the US would be that the prices of these goods would go up. This is because the cheaper imports would be taxed. So the products available in the market in US would be priced higher than usual. Thus American citizens would have to shell out more money for goods like meat, wheat, clothes, electronics etc. Apart from consumers, American business companies like Dell, Apple etc would also facing issues. Most these giant tech companies import their raw materials from China. Thus increase in raw material prices would lead to higher production cost for all American companies. Because of this prices would go up and would reduce the demand among the customers.


The trade war between USA and China is just beginning with both economic power houses showing their might. While both countries have been progressing, this is the time they would want to show their authority as a global leader in business. However, in the interest of global trade it is essential that both USA and China are reasonable in their demands and ensure a smooth global trade.


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