What’s the Real Cost?
By: Paul Quartaroli
What is a trade war? A trade war is an economic conflict that results from countries creating trade barriers of tariffs or quotas against another country in response to trade barriers set up against them. Now let’s go into the trade war between China and the US.
During the summer of 2018 China accused the United States of launching a trade war and said they would respond with similar tariffs for US imports. So, where does this leave the US?
President Trump wants the US to return to the power house economic nation it use to be. He doesn’t want the US to lose jobs to other countries like China and Mexico where labor is less expensive and he doesn’t want the US to be dependent on Chinese imports. The ultimate goal is to bring jobs and industry back to the US. What is the cost of this desired outcome?
President Trump placed tariffs on Chinese imports to help push the US economy to be more self sufficient. When this was done China responded with tariffs on US goods that are of value in China. On April 30, 2019 the US and China were hopeful for a trade deal. “A private chat between China’s leader Liu He and US representatives Seven Mnuchin changed the mood” (Xin). However, “China claimed the US side had kept adding extra demands before accusing Beijing of reneging on what was agreed upon” (Xin). It was hoped these trade talks would end the costly trade war between the two largest economies. “Five days later, the once hopeful negotiations took a sudden turn. US President Donald Trump announced on Twitter on May 5 that the United States would increase tariffs from the 10 percent to 25 percent on US $200 billion of Chinese goods” (Xin). The Chinese officials were not happy and decided to hit back which will make it even more difficult for the two countries to come to an agreement. It remains uncertain what exactly caused this impasse but the global markets when into a tailspin. People who invested money into the stock market lost as investments tumbled. Such investments are used to pay expenses for people who are retired, people who hope to help their children with college expenses and business owners to name a few. This type of financial loss trickles down to impact just about every American. 
The US saw such an economic tragedy during the Great Depression from 1929-1939. “This was the longest and most severe depression ever experienced by the industrialized Western world. Although it originated in the United States the Great Depression caused drastic declines in output, severe unemployment, and acute deflation in a almost every country of the world.” During this time unemployment was at 25% and more than 5000 banks had gone out of business. “Out of work Americans filled long breadlines begged for food, or sold apples on street corners” (Recchiuti). A Chicago Social Worker wrote, “We saw Want and Despair walking the streets, and our friends, sensible,thrifty families reduced to poverty” (Recchiuti). If the trade wars continue at its current pace will the US see another Great Depression that it will not be able to recover from? It’s quite possible.
Works Cited
Xin, Zhou and Wendy Wu. “South China Morning Post.” Was this the moment US- China trade talks fell apart?, 28 May, 2019, www.scmp.com/news/china/diplomacy/article/3012049/was-moment-us-china-trade-talks-fell-apart
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ReplyDeleteThe trade war going on with China is not only aimed at increasing domestic production but also to put pressure on the Chinese government to get rid of their policies that imbalance their trade. They have had a system set up in their advantage for years and it is costing the US, so by making these tariffs and encouraging production outside of China by US companies, the government is hoping to force China to get rid of these policies.
ReplyDeleteSince the U.S. and China are the two largest economies in the world currently, this situation has some similarities to game theory. While these economies aren’t considered part of an oligopoly, there is a payoff matrix between the two based on each other’s actions. The U.S. and China could both benefit by agreeing upon tariffs that increase inward production while also keeping imports for the other country at a reasonable cost. However, both countries are acting with only their own best interest in mind, which is actually making both economies worse-off and stuck in a prisoner’s dilemma. If each country cooperated with the other, both economies would be more likely to grow and less likely to fall into a depression.
ReplyDeleteSo many issues have risen from the tariffs that were set in place for China from the US. In my opinion, these tariffs are not a good thing. It’s making the countries go head to head and not leaving room for any type of compromise. Each tariff leads to greater controversy and it’s creating a divide between the two economies when they really could be working together to better the global economy and impact imports and exports positively.
ReplyDeleteWithout a doubt, this disagreement between America and China is, and will continue to, have economic impacts that may negatively affect our American citizens. With decreased trade, our economy will continue to slow because of the decrease of the stock market. The president wants to grow the American economy back to the powerhouse it “used to be”. He hopes to do this by focusing centrally on America’s own economy and decreasing contact with China. Personally, I believe that increased trade would help our economy grow more than becoming secluded because there is more opportunity to make money.
ReplyDeleteTrade wars clearly have a negative effect both on domestic economies and international economies. This is because limiting trade does not always relate to increasing domestic employment. Additionally, though the US has a trade deficit, it allows our consumers to have access to cheaper goods and a balance of payments still exists. Therefore, these tariffs will not have an overwhelming positive effect on the US economy, though it will aid domestic producers. However, it must be taken into account that trade wars can be used as a political tool and not necessarily as a way to stimulate a domestic economy. Still, either way, it is critical that the US and China reach an agreement soon or economic downturn may become widespread (as these two countries are, as you said, the world's largest economies).
ReplyDeleteIt will be interesting to watch the trade war play out. Xi Jinping is facing a lot of political pressure right now as China is facing its slowest Economic growth in almost thirty years thanks to both an aging population and a shrinking manufacturing sector. But on the other hand the tariffs are costing regular Americans on average 11 dollars a day. For many this is an incredibly low estimate so Trump will be subject to political pressure as well.
ReplyDeleteLeave it to Trump to screw over the hard work of his own team when they are simply trying to improve the situation he has handed to them. I completely understand why someone would assume that fighting fire with fire and increasing tariffs on one country's exports would improve their situation domestically, but that simply isn't the case. I believe Trump is doing this for his base and his pride. If he shows any sign of agreement with China on this issue, it could possibly ruin his image with his supporters considering his verbal siege on China during his campaign. While it's always important to create new jobs and utilize domestically made products, we have to look at efficiency and opportunity costs. If it is simply more expensive to manufacture a product here, then there is no point in doing so because that means that the price of that good goes up which increases the price level which forces workers to demand a higher pay and in turn there is less of the product and it becomes more expensive. We can create jobs, not out of dead or inefficient industries, but by expanding to new industries and differentiating ourselves in terms of products we sell to increase exports. So instead of trying to get back coal mining jobs (which should be gone anyway considering global warming will be nearly irreversible soon) thousands of jobs are available in the renewable energy industry if we were just more willing to pursue it rather than deny it's merit. This could essentially end the trade war if we shifted our focus, keeping the goal of protecting and creating American jobs.
ReplyDeleteChina and the United States are large powers in trade. As a result, both will be affected by this trade war. Both are able to benefit of one another due to the exports and imports that are sold to each county's citizens. Additionally, with this lack of products being transferred back and forth, there is a less need to have people create these products. Thus, the employment rates will decrease as this trade war continues. Yet, with the focus on domestic goods for the United States, many of U.S. companies will grow and many new companies may be built to take the place of the Chinese exports.
ReplyDeleteI think a lot of this trade war is temporary and will be resolved once both sides sit down and make a long term agreement. Most of the tit-for-tat tariffs right now seem to just be to improve each countries bargaining position if said meeting occurs. It's in neither countries best interests for the current state to become the long term trend. It really comes down to game theory and right now, both sides are trying to get their biggest advantage. However, at some point a Nash equilibrium will be reached or a more major change will take place.
ReplyDeleteThe trade war between the United States and China is petty and could be dealt with in a much better way, especially from the instigator, the United States. We need to acknowledge that China is too large of an economy too simply bully into submission. Therefore, we need to invest in our future, and try to make our kids more educated and more prepared for the future than international kids. We can do this by putting more tax money to education, innovation, and technology rather than cutting taxes and defunding government programs for students. Lastly, while China may be being unfair towards the United States now, they are still an important trade ally, and we still benefit a lot from trading with them. Therefore, we should recreate the TPP and try to renegotiate terms rather than just attempting to our tariff the other. Trump is a CEO, not a politician, so it is possible that he walks into negotiation rooms simply thinking that he will get what he wants because he has always been the most powerful man in the room, but that is not true anymore. In my opinion, Trump is only harming the global economy and his own agricultural supporters.
ReplyDeleteChina has been the United States largest goods trading partner and with an escalating trade war between the two nations, both will be negatively impacted. I do think Trump is placing tariffs to make the US more self sufficient, however in the process he is causing a raise in prices and lost of business which can result in a failing economy. Since the US relies so much on China’s products, if they stop trading with us, it will hurt our economy more than it will hurt theirs. In the end, this trading war will negatively impact the US economy more than China’s.
ReplyDeleteIt is key to note that a tariff is less effectual in the global market where the game is not zero-sum; there is more than one party, and output can be increased or decreased, so by enacting a trade war, unaligned parties indirectly benefit. Additionally, tariffs on goods are so strange in our service economy because we don't have or need the manufacturing sector we had during the cold war; it's all imported and outsourced from Mexico, Canada, and SE Asia. Ideally we would scrap US steel and teach those employed in that industry to do something that requires a more complex set of skills, like engineering those objects that get imported.
ReplyDeleteWhen it comes to trade wars, converts to great controversy among the people. This is because not only does trade between other countries allow people to get different kinds of products and offer jobs, but it also allows people to pay less for products. The U.S. has been creating tariffs with China and the debate is whether that’s a good idea or not. A lot of the U.S. businesses make products in China, due to cheaper production and citizens get more products for less cost. Because of this it benefits the U.S. economy by growing businesses and communication. But because of Trump being scared or nervous about possible outcomes, he wants to put a stop on the trade. Overall affecting our economy, increasing our prices for goods, losing jobs, and decreasing business growth. So the real question is do we stick to safety or do we continue to develop as a country?
ReplyDeleteWhen talking about tariffs make sure to include what it is in case those who are reading this article can understand what's happening.A lot of different thoughts are going on with the trade war, but overall this problem needs to be solved before we have the possibility of another great depression, and in this generation it may be harder to bounce back from the depression which could lead to more people out of jobs and just more problems than the original. Instead of Trump addressing the trade war over twitter he should make a public announcement and give the people some sort of plan to show us that we are safe from another great depression, as opposed to sending out a tweet. Most likely if this were to become a problem again, we would use US materials till the imports and exports became a problem.
ReplyDeleteIf there were to be another big trade war, I believe that both sides would not be able to come back from it. As it sits right now the US is almost completely made from Chinese products. Take everything from your house and I bet you that more than 70% of the stuff you own is made in China. I do believe that making the US more self-efficient is smart, however, this will with no doubt make everything less affordable, and will make live harder for the typical consumer.
ReplyDeleteThe US and China boast the worlds’ largest economies. The US economy features a technologically-advanced services sector and is dominated by services-oriented companies in areas such as technology, financial services, healthcare, and retail. China’s economy is known for its manufacturing. Also, China has experienced a great deal of economic growth in recent years, but is now projected to slow down. The trade deficit that the US has with China was $419.2 billion in 2018. The US is obviously reliant on China for a great deal of the products we import. It seems unreasonable to assume that the US would be able to become self-sufficient in these sectors. Companies want to get items for cheap in order to sell them for a profit. Because labor is cheaper in China, companies can pay less to get these products. If we start producing more items in the US, the cost will be greater. Overall, I think the US would not be able to become self-sufficient. We’ve relied on products from China for too long and have dug ourselves into too large of a trade deficit. There are ways for Trump to encourage American companies to move to manufacturing, but a trade war doesn’t seem like the best solution.
ReplyDeleteI feel as if the cons of the situation vastly outnumber the pros. It is good that we are trying to become a more self sufficient country, in fact our reliance on exports is so vast that I think it’s a good step for America to go. But you have to ask yourself if this is for the good of our economy, or if this squabble amongst countries could lead to us feeling the heavy consequences of that back and forth. Is this really worth the risk? In my mind it is most definitely not, seeing the impact of the Great Depression, it would not be wise to repeat another economic downfall.
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