Question

A) Topic :

Elaborate the China-U.S. Trade War and the impact to China Business Environment as follows:

i) Briefly elaborate the trade practices and their effects which the current U.S. President, Donald J. Trump claims are unfair such as the growing trade deficit, the theft of intellectual property, and the forced transfer of American technology to China from 2010 to present.

ii) Analyze the outcomes of the China-U.S. Trade War and U.S.’s subsequent policies impacts to current China Business Environment in terms of Political, Economic, Social and Technological (PEST) aspects.

iii) In your opinion, how to deploy Porter’s Five Forces model to predict the Trade War impacts on the near future China Hi-Tech industries’ challenges and opportunities?

iv) If you are the CEO of a Hong Kong Hi-Tech Firm with extensive business cooperation with Chinese Hi-Tech partners, what strategies would you like to propose to the Board of Directors? And why?

Answer 1

According to the World Bank's Global Economic Prospect, the global economy has slowed to its lowest pace in three years because international trade and investment have been weaker than expected. International trade has been severely affected by the trade war between the US and China.

In June 2019, the US increased the tariffs further, to 25%. China responded by raising the tariffs on a subset of products that were already subject to tariffs. In September 2019, the US imposed 15% tariffs on a large subset of the remaining $300 billion worth of imports from China not yet subject to tariffs.

Why of Trade War

Trade war is a subset of Trade Protectionism.

It is a conflict between two or more nations regarding trade tariff imposition on each other’s goods.

A trade war is usually initiated when a nation imposes tariffs or quotas on imports and foreign countries retaliate with similar forms of trade protectionism

It also triggers inflation when tariffs increase the prices of imports.

Disadvantages

in the long term, trade protectionism weakens the industry. Without competition, companies within the industry have no need to innovate.

Eventually, the domestic product declines in quality and becomes more expensive than what foreign competitors produce.

Increasing protectionism can further slow down economic growth

HOW THIS AFFECT TRUMP ELECTION

as we see the global COVID-19 pandemic had resulted in over 100,000 deaths in the United States alone.

The protests triggered by the killing of George Floyd, an African-American man, by Minneapolis police had erupted in over 100 American cities

EXTERNAL AFFAIRS : how closed or open the US would be on matters of trade, immigration, investment, and technology.

Trump triggered a trade war ; Beyond trade, his administration has taken other aggressive steps towards decoupling the US and Chinese economies, including steps on students and technology.

Conclusion

• Even though it is a lengthy and time consuming process, the settlement of disputes through international conventions and rules is the need of the hour.
• WTO dispute settlement resolution mechanism should be approached instead of unilateral decisions. The benefit of the WTO process is that it prevents the damaging consequences of trade protectionism. Nations can resolve their disputes through WTO instead of raising tariffs.