The United States and China have the two largest economies in the world. From the start, President Donald Trump has called out China for its unfair trading policies and has threatened to increase tariffs. The added tariffs between the countries does not only affect the United States and China, but almost every country in the world.
The looming trade war between the U.S. and China recently gained momentum when the Trump administration decided to increase tariffs on steel and aluminum. These increases raise the prices of foreign goods in order to promote businesses inside of the U.S.
Because of the uprising tension between the U.S. and China, there could be a drastic change in the types of imported goods from China and a decrease in the value of some goods. Both countries have outlined thousands of potential goods that they will put tariffs on, as well. These goods vary widely, ranging from agriculture and industry to transportation devices. The U.S. relies heavily on Chinese goods, buying around $4.6 billion worth of goods every year (Executive Office). Without these goods, the U.S. would be forced to buy elsewhere, and the prices will not be as good as China’s.
This trade war obviously affects the U.S. and China more than any other country, but countless countries will feel the effect, too. For example, countries such as South Korea, which is a major importer of both American and Chinese products, have a lot at stake. South Korea would struggle to buy goods from the U.S. and China because the cost of their goods would be so high. Many other countries rely on the U.S. and China or both to trade with and stimulate their economy, and if a full-scale trade war were to break out, countless countries would face similar issues.
Many American businesses have already said that a trade war could hurt their company and cause them to lay off workers. The low prices from China allow companies to profit by buying cheap imports. If companies are forced to get goods from inside the U.S., their profit margins will decrease, causing either higher prices or lay-offs.
While the solution to this problem is unclear, it should be each countries’ top priority to end this conflict before its effects are irreversible. The U.S. and China are reliant on the other for maintaining strong economies, if a full trade war were to break out, both economies would collapse.
President Trump has been at the head of this conflict, saying that the U.S. is getting screwed by China’s current trade policies. Currently, the trade deficit between the U.S. and China is $375 billion. This large deficit is why Trump is angry and views China as a faulty trading partner. The reason why the U.S. buys from China is because the Chinese government purposely keeps its currency, the yuan, weaker than the dollar to help keep its prices lower than the U.S.’s (The Balance).
The possibility of a trade war has the world watching nervously, hoping that both sides de-escalate the situation. The Trump Administration is demanding a change in China’s policies and wants trade between the two countries to be fair. If there is not a change the U.S. will add more tariffs and be forced to trade elsewhere. Every added tariff is one step closer to a worldwide financial crisis.
