China-U.S. Tariff Dispute
Written by: David Bell
If you have been watching the news lately, there is a dispute between China and the U.S. regarding tariffs. China has imposed a tariff of up to 25% on 128 american goods. This is targeting goods such as pork, wine and fruits. Those products had a worth of up to $3 billion for our economy.
Although this sounds bad for the U.S. because we are going to need to pay more for these goods since China imposed a tariff on them, President Trump has imposed $60 billion of tariffs on alleged intellectual property theft on China. To make that more clear, China has stolen some of our trade secrets and is now selling them for cheaper. For example, American Superconductor started doing business in China. The company partnered with Sinovel, which manufactured the wind turbines while American Superconductor made the technology that powered the turbines. This partnership turned AMSC into a billion-dollar business. They built a factory in China, a design center in Europe, and added hundreds of jobs in both of those countries (Massachusetts).
After working so well together, Sinovel started to show signs of refusal. They owed AMSC about $70 billion on a shipment it had already received, and also refused a shipment that was ready to go. The AMSC stock price had been almost cut in half overnight, losing about a billion dollars in shareholder equity causing them to cut around 700 jobs. McGahn, CEO of AMSC, said “Wall Street had written us off as dead”. That is a big deal for a company, when a credible source that many people rely on called your business “dead”. The graph below shows how from the years 2000 to 2007, China’s IP theft cases were increasing dramatically.
(Fig. 1. This shows the IP theft cases for China between the years 2000-2007)
After the refusal of many shipments, AMSC was wondering why China stopped doing business with them. After investigation, Dejan Karabasevic, an employee of AMSC confessed to giving China the source code for the wind turbines because China bribed him with $2 million, women, an apartment, and a whole new life in China.
You are probably wondering how IP theft relates to tariffs. Well if a country's trade secrets are being stolen by a country that they do a lot of business with, you are going to put tariffs on the goods that the other country needs out of retaliation. In this case, imposing tariffs on goods that China needs will cause a lot of positives and negatives for the economy. A positive would be that we impose tariffs on goods that China is very dependent on so in the long run we earn more money on those goods. A negative to imposing tariffs would be that China might retaliate and impose tariffs on the good we are dependent on. And when retaliation happens between countries it is called trade wars. I feel as though trade wars and tariffs are means of negotiation, if done right, they will benefit the Economy. If both parties come out of the negotiation feeling equitable about the situation, they will feel that it was a success.
You might say that imposing tariffs on goods that China buys from us will cause our economy to lose money, but in reality, trade wars and tariffs help regulate the prices to better our economy as a whole in the long run.
Works Cited
“Here's How the China-U.S. Tariff Talks May Already Be Hurting America's Job Growth.” Fortune, fortune.com/2018/04/23/tariffs-trump-china-list-trade-war-jobs/.Lawder, David, and Howard Schneider. “Donald Trump's next Chinese Tariffs Likely to Hit Consumers' Wallets.” Global News, 22 Apr. 2018, globalnews.ca/news/4159908/donald-trump-chinese-tariffs-effects/.
The Massachusetts-based energy technology company won a landmark case in January against its former Chinese partner Sinovel. “Chinese Trade Secret Theft Nearly Killed My Company.” CNNMoney, Cable News Network, money.cnn.com/2018/03/23/technology/business/american-semiconductor-china-trade/index.html.
The United States has long said that intellectual property theft has cost the US economy billions of dollars in revenue, and thousands of jobs. “How Much Has the US Lost from China's Intellectual Property Theft?” CNNMoney, Cable News Network, money.cnn.com/2018/03/23/technology/china-us-trump-tariffs-ip-theft/index.html.
In relation to Ben’s post last week, I agree with you. This is like a back-to-back game between the United States and China. China imposes tariffs on U.S. goods and we bounce back with something similar, whether it be tariffs on their goods and/or property. I think the part where you added the impact of the release of trade secrets on a nation was intellectual, considering it must have a large impact on tariff evaluation and/or the increase or decrease of tariffs on goods. In addition, that last sentence that you wrote provided a secure opinion on this so-called issue and I agree, simply because stabilizing the economy is ultimately safer than taking larger risks.
ReplyDeleteI agree with Kate that we need something that will stabilize our economy other than taking a risk. As Kate said it's turning into one big game of responding back to another country's decision. With the US responding to China's decisions can be dangerous because things could keep getting worse and lead to no trades with China. I think this is where the big risks come into play because if we keep playing them at their own game instead of just giving in, one country will win the or take over and be in a better situation. Overall, I just think it's in our best interest to not respond to their games and worry about stabilizing our economy in other ways other than making a larger impact on tariff evaluations by either increase or decrease tariffs.
ReplyDeleteThis is a very interesting topic to me. I feel like my entire life all I have heard from my relatives is that nothing is made the way it was used to because everything is made in China now. This "tariff war" could potentially put an end to that if things continue to progress. When I first heard of the president putting in tariffs on China, I knew China's response would be to do the same thing right back.
ReplyDeleteThis was a good topic choice since the trade wars so crucial right now. I have noticed this in my own life actually, I used to order swimsuits from a Chinese website and now the prices have nearly doubled, I'm not sure if this is for sure why but I feel like it correlates with the timing of current events. All in all, I think that the move made by Trump is extremely risky and may not pay off in the long run since both countries are likely not willing to cave and prices will continue to rise on more and more goods over time.
ReplyDeletei agree, I think this is a very big deal and could affect how many goods come into the US on a regular basis. China is one of the main countries we trade with and if we keep having problems with trade we could lose a lot of potential goods and services which could definitely change our economy.
ReplyDeleteChina imposes tariffs on U.S. goods and retaliate, whether it be tariffs on their goods and/or property it's just how it goes in the world today. when you mentioned the impact of the release of trade secrets i found that very interesting and a very good point.
ReplyDeleteThank you for the post and it is very interesting to read. If we have to study about the trade secret in the best place like Share Market Classes in Chennai for the bright future.
ReplyDelete