Question

Please analyze why and how the globalization and trade war between
China and USA have positive and negative effects on multilateral free
trade system and international business.

Answer 1

Analyze why and how the globalization and trade war between
China and USA have positive and negative effects on multilateral free
trade system and international business.

China is the world's largest exporter and the United States is the world's largest importer. They have so far been important pillars for the global economy,so the globalization and trade war between China and USA have positive and negative effects on multilateral free trade system and international business.

Negative effects

• In the United States, the trade war has brought struggles for farmers and manufacturers and higher prices for consumers
• In other countries it has also caused economic damage
• Some people will lose their job.
• It will impact GDP negatively. Some countries will cope better then others.
• It has also led to stock market instability
• It can cause a recession or worse. Because of the size of the US-China economies recession could be world-wide.
• In the protectionism scenario, the level of global real GDP is reduced 0.1% this year, 0.8% in 2019, and 1.4% in 2020. Thus, global economic growth in 2019 and 2020 is only marginally above our 2.0% threshold for a world recession.
• Countries with a limited products to export are more vulnerable in trade wars. If you only export 5 products your risk is high compared to exporting 30 different products.
• Global growth is beginning to slow
• If you have a large trade deficit, maybe it is sign, your domestic industry is not competitive, not inefficient and not addressing the needs of the people. Domestic protectionism is hurting you country.

Positive:

• some countries have benefited from increased manufacturing to fill the gaps
• Educate people and politicians on how costly a trade war can be
• Might educate some politicians of the downside of protectionism
• Gaining knowledge that a friendly trading partner may not always be friendly, as Canada, South Korea and others have learnt this year.
• It might force some countries to develop critical domestic industries to avoid future impact due to trade war.
• Educate business and political leaders to spread your exports to many countries. Do not put majority of exports into one country.
• Identify potential to develop new products to increase exports of those countries reliant on imports.
• Pushing back on trade disputes can be beneficial. If you accept being blackmailed by tariffs, you maybe seen as weak.
• real global exports of goods and services are 2.4% below the baseline level by 2020
• US imports fall 4.5% in 2020,China also experiences a significant drop in real imports, which fall 3.2% below the baseline in 2020.
• Long term some Asian countries could benefit by having some low wage manufacturing plants relocated. China is transitioning its manufacturing profile towards higher value products, and this gives opportunity for neighboring countries with low wages to get on the band wagon.