Question

Two of the world’s largest economies, that is, the United States (U.S.) and China are presently involved in a trade dispute whereby the US is threatening to raise tariffs on $200 billion worth of Chinese exports. The position of the US is that they will be taking in billions of dollars in tariffs from this increase. In its retaliation, China’s Finance Ministry announced that it would raise tariffs on a wide range of American goods to 20% or 25% from the existing 10% tariff rate.

Provide an assessment of the current trade dispute between the US and China. Include in your assessment discussions on the following among other trade related matters of relevance to this topic;

(1) What is a tariff?

(2) What do you think are the motives for the trade tension particularly the tariff increase?

(3) What are the products which China exports to the US which the US is proposing to increase tariffs as high as 25% on?

(4) What are the products which the US exports to China which China is proposing to increase tariffs on in its retaliation against the US?

(5) Do you think businesses of the Caribbean region will be impacted if the tariff increases take effect? Give reasons for your answer. (give an example of a business/industry from the region to support your points, if applicable)

(6) What is the World Trade Organization (WTO)? Is the US a member of the WTO? What about China?

(7) Do you think the WTO can play a critical role in trying to resolve this ongoing trade war between the US and China? Give reasons for your answer.

Answer 1

1. Tariff is tax or duty imposed on particular set of goods on imports and exports.

2. The motive of increasing the tariff particularly is to raise the price of imported goods and thus promoting the domestic goods manufactured within the country. As a result domestic manufacturers are encouraged compared to foreign manufacturers and foreign made goods.

3. China exports electrical machinery, machinery, furniture and beddings, toys and sports equipments and plastics.

4. US exports aircraft, machinery, electrical machinery, optical and medical instruments and vehicles.

5. As due to tariffs, China made products become expensive, US will start importing goods from Caribbean region and thus their business prosper.

6. World Trade organization is an international agency promoting trade and business amongst the member nations and to resolve the conflicts in case of any between the member nations. Both US and China are the member nations of WTO.

7. WTO will play an important role in resolving the conflicts arising between the member nations and to promote the trade amongst the nations.