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In tour own words, how does the trade relationship between the United States and China effect...

In tour own words, how does the trade relationship between the United States and China effect United States Multinational firms?

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Expert Solution

There are different aspect need to be taken care for understanding the effect of US China relation on US MNCs which are as follows:

1. Exchange rate: Due to exchange rate there is disadvantage for US firm to produce goods in US becuase it is costly for them to sell it in the market.

2. Labor cost: Labour cost is far chaper in China which makes US compnay to get huge profit by manufacturing goods in China.

3. Market: Most of US firm has huge market in Asian nation thus it is easier for US firm to manufacture products in China which is nearer to its market.

4. Labour Law: In US there is strict labour law which is related to wages and working hours but that is not the cae with China market which increases the productivity factor for the US MNCs.

5 Labour market: In US there is shortage of bule collar workers which put pressure on the US MNCs to find right labor in US but that is not the case with China due to huge labour surplus. Thus US MNCs have to pay less for the per unit of work done in China in respect to US.

All this factor need to be taken care by the US MNCs before moving to US from China becuase it will imapct very adversly to US MNCs and they may lose the market share due to higher production cost by developing product in USA.

jeff jeffy answered 1 year ago
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