U.S tariffs on China – what are the implications?

One of the most-covered issues currently in the news is on the heavy tariffs that the American government is putting on Chinese products being imported into the country. China has retaliated by placing substantial tariffs on U.S. products. But just what are the implications of these tariffs with regards to how they will affect the economies of both of these economic powerhouses? This article explores the pressing questions about this ongoing trade war between the two nations.

One of the most-covered issues currently in the news is on the heavy tariffs that the American government is putting on Chinese products being imported into the country. China has retaliated by placing substantial tariffs on U.S. products. But just what are the implications of these tariffs with regards to how they will affect the economies of both of these economic powerhouses? This article explores the pressing questions about this ongoing trade war between the two nations.

in tariffs, Tradewar
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U.S tariffs on China – what are the implications?

One of the most-covered issues currently in the news is on the heavy tariffs that the American government is putting on Chinese products being imported into the country. China has retaliated by placing substantial tariffs on U.S. products. But just what are the implications of these tariffs with regards to how they will affect the economies of both of these economic powerhouses? This article explores the pressing questions about this ongoing trade war between the two nations.

Citing “long-time abuse of a broken international system” by China, then –incumbent Donald Trump pledged during his presidential campaign that he would place significant tariffs on Chinese goods. Making good on this promise, this past summer, the Trump administration began imposing 25 percent tariffs on $34 billion in Chinese imports. On September 24, the U.S. government placed even heavier tariffs on as much as $200 billion of Chinese goods.

Although Trump has placed tariffs on products coming from a myriad of nations including Argentina, Mexico, and Canada, why is he putting greater emphasis on China? The election of the 45th president of the United States in November 2016, marked an American milestone that was part of a growing populist sentiment throughout western nations.

A nationalist who favors protectionist economic policies in lieu of globalist free market ones, Trump vowed to bring manufacturing jobs back to the United States during his election campaign. Economists and those in business and industry have long speculated that this move – along with lowering corporate taxes – is designed to slowly entice American companies to once again set up shop at home.
In recent years, the United States has accumulated a staggering $357.2 billion trade deficit with China while having a trade surplus of only $40 billion. Trump has stated publicly that these tariffs are not only necessary to lower the trade deficit, they are also needed to protect the intellectual property U.S. businesses, especially those operating in China that are under immense pressure from Beijing to share information.

Impact on the Chinese economy

This Asian economic powerhouse is far from being a one-trick pony. In recent decades, the Chinese economy has become increasingly diversified and will continue to branch out in the future. That being said, much of the nation’s workforce continues to be employed in the manufacturing industry, quite often by  U.S. corporations that are being persuaded to return stateside.

Furthermore, construction and infrastructure development are two major economic sectors in China that have seen a significant slowing of investment in 2018. In fact, during the fiscal year of 2017, investments by foreign entities accounted for a whopping 44 perfect of the country’s GDP (gross domestic product).
If for sake of an argument, most or all U.S. manufacturing companies pull up stakes for the United States or other nations due to escalating tariffs, China may very well experience high rates of unemployment. For Chinese companies whose products have been purchased by American consumers for decades, it will take time to find other markets.

Impact on the U.S. economy

It isn’t only the Chinese consumer who is feeling the negative effects of this ever-intensifying trade war. Americans are also starting to experience its damaging impacts. Even before the tariffs went into effect, chief economists and corporate executives warned that heavy tariffs on Chinese goods coming into the United States would lead to widespread inflation – not to mention significant job losses. Although some American companies have returned from China (predominantly setting up operations in right-to-work states), so far there has not been the anticipated mass exodus of companies that would make the United States the manufacturing powerhouse it was up until the 1970s. Yet American consumers are already paying higher prices for many types of products. Right now, the Chinese government is on the verge of imposing $60 billion on
U.S. products exported to China. U.S. seafood producers, as well as farmers who ship large quantities of crops such as shrimp and soybeans to China, are scrambling to cope with the changes.

Impact on world economies
Should this trade war continue to escalate, it could cause instability in world markets. The International Monetary Fund (IMF) has said that the trade tensions between the U.S. and China will have larger implications for the world economy, costing upwards of $430 billion. In fact, the IMF has warned Trump that his tariff police could lead to “global retaliation” whereby countries would boycott U.S. – made goods while imposing crippling tariffs themselves.
How will tariffs benefit the U.S. economy?

Depending on who you are, you either see the glass as being half – empty or half –full. So far, we’ve seen the arguments for and against Trump’s much-maligned regime of tariffs. But if everything goes well, how will these tariffs benefit the U.S.
economy?
The logic is quite simple: protect American jobs by limiting imports. Lowering corporate taxes will be the catalyst for many companies to hire American workers again as opposed to cheap labor in developing countries. Also, by imposing heavy tariffs on China – a country that has produced the majority of American consumer goods for 40 years – Americans will have no other choice but to buy products made at home.

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