Question

8. The US and China as competitors seem to be engaged in a trade war. The bone of contention is tariff imposition from both the “warring” countries.

i)What impact is expected on imports or exports by such tariff-imposition? Why?

ii) What impact can tariffs possibly have on GDP growth of these two countries?

Answer 1

Trade War:

• A Trade War happens when one country imposes trade barriers on another country's import in response to barriers put up by first country.
• Positive Side : It protects national interests and provide advantages to business.
• Negative Side: It hurts consumers, local companies and economy.

"The current trade war playing out between America and China has no clear winner yet, but time will tell."

Impact on Exports and Imports:

• The pace of trade between China and US has been slowed down.
• There has been increase in tariffs from both sides.
• US runs largest trade deficit with China.
• US is largest producer of soybeans and it has been exporting them to China. But as a penalty to US China has stopped importing soybeans and other agricultural products from US.

Impact on GDP

• The tariff war between the world's two biggest economies is going to hurt both of them.China will be affected more
• US GDP is expected to be lower by 0.6% whereas China's GDP will be declined by 1%.
• China has already stopped importing many agricultural products from US..
• The U.S. tariffs specifically target high-tech Chinese goods to hurt the “Made in China 2025” campaign.
• However, In long term Americans are also going to be affected as their favorite products may become 15% more expensive.