The subtle trade war with China

Trump tariffs, basically a list of tariffs imposed during the presidency of Donald Trump. Much has been said of some of these tariffs all throughout the media, but when you look at it, not many people actually understand what they are, how they work and what real effects they have on the economy. Do you? Probably not, so, let’s get down to business.

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Going back into the run-up for the 2016 US Presidential campaign, the then-Republican nominee repeatedly spoke out in favour of renegotiation policies for US trade agreements. We all remember the Putting America First economic strategy Donald Trump had launched in a video message and his incessant criticisms of the Trans-Pacific Partnership and the North American Free Trade Agreement. Probably the most influential and aggressive of economic disagreements though came with China. This is also the least explained of conflicts and little know how things degenerated so much, and so, one must start from the very beginning in order to roughly explain the series of events that led Us-China relations to where they are today.

Donald Trump had been speaking about tariffs for quite some time, especially on the grounds of ‘stolen’ US intellectual property. So on the 22nd of March of 2018, the US Trade Representative applied tariffs of around $50Billion on Chinese goods, and although this should technically lead to a “richer US”, that was not what happened in this specific instance. As investors saw the risk of a looming trade war, a vast amount of companies that exported to and imported from China saw their stock prices plummet. The more dependent the corporation was on Chinese trade, the larger the losses its stocks suffered. As a result, Dow Jones Industrial Average dropped by about 2.9% as China started announcing its own tariffs just 11 days later, primarily on around 130 US products, with taxes on pork receiving as much as a 25% levy. From here on, the situation only deteriorated. 24 hours later, the United States listed more than 1,300 Chinese products on which to impose tariffs, and sure enough the next day saw China publish a 25% tariff on a further 106 US items.

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At this point, Trumps’ words seemed to be differing quite a bit from his subsequent actions. On one hand, he was tweeting that “[There is no] trade war with China”, yet not a day passed before he proceeded to instruct the US Trade Representative office to move forward with another 100 billion dollars worth of tariffs. With all of this happening in a mere timeframe of just a few days, one would expect that things would calm down and some sort of agreement would be reached between the two economic giants so that no further damage is done. On the contrary though, what happened is that China cancelled Soybean orders from the US. The cancellation of such an order was quite significant, especially considering that soybeans were the United Staes’ number one agricultural export towards China.

Ok, that’s that. Well, not just yet. Donald Trump had set out to rectify the losses he claims his predecessors accumulated, and to do so, he added another list of $50B Chinese goods on a 25% tariff and $200B of the same goods on a 10% tariff. China is not the only victim of Trump’s attempt to keep American money within the states. This year alone the US has been involved in ample levy conflicts, prominently over the Steel and Aluminium industry, engaging against the likes of Mexico, the European Union and the northernly neighbours, Canada and, needless to say, retaliations were not lacking.

All in all, this web of tax games have led to a probable 0.5% being knocked off of global growth by just 2020. The reality is that all parties involved and even those that aren’t are suffering from relational degradation of this sort, and the quicker solutions are sought rather than exchanges of ‘punishments’, the better the future could look for our global economies.

Written by: Gianluca Vella

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