Question

Please answer as soon as possible -thanks

You know from recent news that the U.S. and China are having a trade war now as the Trump administration has slapped import duties on $34 billion of Chinese goods, but the USTR wants to impose another $200 billion on a wider range of imports, including for the first time an array of consumer goods.

In retaliation, China has targeted the American farmers and ranchers who have in the past benefited from exporting a number of products to China. Some 91% of the 545 products China is placing a tariff on are from the agriculture sector. China has also responded by wooing European businesses and politicians with improved market access and investment terms.

BBC commented that the tit-for-tat mentality between Beijing and Washington could just end up antagonizing both sides to a point where they cannot climb down from their hostile positions for fear of losing face. "You start with protectionism and isolationism," says Victor Mills, chief executive of Singapore's International Chamber of Commerce. "And then you don't just beggar your neighbour, you beggar yourself."

The CEO of the global shipping giant Maersk said recently in a presentation that Trump’s protectionist tariffs on China and other countries could slow U.S. trade growth by up to 3 or 4 percent: a huge hit.

Discussion questions:

In light of the current scenario, and based on your reading of chapter 7 of the textbook:

Do you believe that this type of trade war is good for the people of the countries involved? Why or why not? Think from the perspective of all stakeholders: governments, producers, support industries, logistical companies, sellers, and end-users.

Should the WTO mediate in this dispute?

Answer 1

My Opinion: No this type of trade war is not beneficial to any of the stakeholders. None of the entity or stakeholder can work in isolation with other entities. Be it any country or any other organisation. Analysing the situation from perspectives of following stakeholders:

1. Government: these sort of actions r generally politically motivated. They ensure that the current government displays strong image to the general public of a country. However a potential benefit to the government is that they save a huge amount of resources which are expended as subsidies and these resources can be invested to generate more gross Domestic Product for a country.

2. Producers: These are the people who are worst hit buy such decisions or trade Wars. At times the complete businesses are close down because of such extremist decisions of government.

3. Support Industries: As the main businesses take a hit, support industries or any other ancillary businesses are bound to decline. For example if price of fuel rises, sales of vehicles take a hit.

4. Logistical Companies: Logistical companies are also covered in ancillary businesses which completely depend upon the inflow of goods and products in n economy. When a country removes import subsidies, the inflow of foreign products falls and hence the revenue generate by logistical companies also tend to fall.

5. Sellers: Sellers are generally covered in those category which are least hit by these wars. They are the penultimate component in selling chain. They can well only what they can procure. So if imported goods are dearer they'll shift to domestic goods and earn profits from there.

6. Users: The cost of living substantially rises and their percentage of spending increases. We feel that Chinese products are comparatively cheaper and during a course of time a person builds his/her dependability on a certain product. But when that product becomes expensive with no close substitute, then the problem of middle income group people starts increasing.

Conclusion: Hence based on our above discussion we conclude that governments should give a deep thought in these aspects as well.