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Trade War

Updated October 13, 2020
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Trade War essay

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Introduction

Of late, International news has announced about the unending trade war among China and US that is going on and is getting honed. Amadeo (2018) clarified that trade war is the financial clash when one country began to set the tariffs or portion on the imports product(s) or service(s) and other countries reciprocate with comparative forms of arrangement intends to complete a guarded measure. The trade war is identified with economy struggle between at least two countries to crush each other regards to the country’s monetary status. As indicate by the World Bank report, the US’s economy is the largest in the world and pursued by China. Gray (2017) contended that U.S might be supplanted by China on account of the monetary hole among US and Chian is excessively close and now China is one of the quickest developing huge economy on the world. In spite of the fact that US’s economy is staying in the primary position as of late, US ought to get ready to make the best strategy to maintain their throne in the world’s economy. These circumstances can be one reason why the trade war among China and US is happening. On the other hand, the historical backdrop of globalization additionally impacted the China-US trade war. This essay expects to a deeper profound comprehension in regards to the nature of China-US trade war and some impact on it.

Discussion

 

Crude analysis of China-US Trade War’s Natures

A China-US trade war is formally begun in 2018, it turns into the global news and got a great deal of consideration from the vast majority around the world particularly the general population of the United State and China. US president Donald Trump is the one who initially drove the trade war among China and US that occurrence as of late. Donald Trump began the China-US trade war dependent on a misguided judgment of the China and the financial status, which are the allegation that China has been deteriorating their currency, the estimation that China got the expansive trade surplus and US exports to China influenced the diminishing American manufactures and taking their employments (Jin, 2017). Other resource contented that there are three noteworthy reasons why US initiating the trade war with China, which are; depression job invention in the US in view of US’s trade shortage, presumption that China utilizing unlawful and out of line ways to obtain the US technology at limited expense, and thought of the case that said China look through the shortcoming of US national security and global standing (Liu & Woo, 2018). In spite of these impression of the nature of China-US trade war, there is another reason through the approach from the long history of globalization recognition. The China-US trade war is incorporated as the universal political case that makes everybody befuddled in view of it difficult to identify which one the truth and no one knows the real purpose of the trade war because there is no valid resource regarding the political cases.

China Globalization History

China is one of the developed countries in the world that being successful in the field of business and is number two of the world’s economy. Despite it, before China reached this state, China was a poor country under the Chinese Communist Party. The domestic economy was isolated from the international economy before (Nolan, 2004), but nowadays China transformed to improve economic performance. The growing of China’s economy is not only influencing the local economy status of China, but it also influences the worldwide economy state. After decades, China succeeds made a transition from the isolation domestic economy to the key player in the global political economy (Breslin, 2007). The transition forced China to resolve the relationship between economic changes and political system, and finding the necessary ways to improve economic performance (Nolan, 2004).
“What is Globalization” (n.d.) depicted globalization has an impact to the momentary advancement and human prosperity in the public eye far and wide that that processing the interaction and reconciliation of various countries. Nolan (2004) contented that China’s globalization challenge is to figure out the most ideal approach to coordinate the economy framework in China with the worldwide economy. China can be come to the ongoing state and become one of the countries with greatest economic power since China has been transformed through the progress from the isolated economy and their globalization endeavors and strategies. Going Global is China’s aspirations for global authority and participation that advance to mirror the domestic objectives of turning the development driven organization and fortify the party’s claim of the legitimacy (China Policy, 2017). It is not piece of cake for China to achieve their present state, China had through a long history of the globalization.

Make a long story short, in 2001 China joined to the World Trade Organization (WTO) and according to Yue (2012) it was a big decision under the Hu-Wen reign and it was such a big risk for the Chinese businesses. Within the admission of China into the WTO in 2001, China started the first globalization strategy and claimed as Going Global 1.0 (China Policy, 2017). Yue (2012) argued that the natural trend of economic development of China is not because the economic success in the 1990s, but it is because the indictment to keep China’s economy growing up so China can be the member of WTO as earliest as possible. Because of the Going Global 1.0 strategy is not really successful, another strategy is developed which is Going Global 2.0. Going Global 2.0 strategy is included the industry plan of “Made in China 2025” strategy under the Xi-Li leadership.

China-US Trade War and Made in China 2025 Analysis

Made in China 2025 is the initial strategy of China to upgrade the Chinese industry that formed in 2015 and approved by China’s State Council (Kennedy, 2015; Laskai, 2018). Made in China 2025 purposes to the new economic rising from the science and technology, innovation, service, and consumption to make national champion firms to be bigger and stronger and be able to engage with global commerce (China Policy, 2017). (Yue, 2012; Kennedy, 2015; Laskai, 2018) explained that Made in China 2025 strategy aims to be succeed in China’s localization to raises up to 70% by 2025 regarding to the domestic content of core component and basic materials called as “self-sufficiency” and focused on 10 sectors, so China can reduce the technological dependence on foreign country indeed can export the high technology goods and raw materials.

Made in China 2025 strategy is not easy to accomplish, it is a national mobilization that needs huge economic evolution to speed up the technological development. Despite it, if the China globalization strategy successful, it will be harmful to the US regarding the economic status and international market. Because of China globalization has increased and there is a sign of success, the US tries to stop the China globalization for their own benefits. That approach is one of the potential causes of the main reason for the US started the trade war with China. US trade war that will be turned to tariff war is not purposing to China increases the import of American goods, and it is not also to change the legislation, all the more not to stop the technology transfer to China. The US increases the tariff to pressure the Chinese economy to obstruct the technology development of China. This argument can be strengthened by the argument of Dodwell (2018) who spell out that actual US purpose of trade war is not targeting to the tariffs, aluminium, car, and steel, but the US targeting to the China globalization strategy of Made in China 2025.

US targeting to destroy the China strategy of Made in China 2025 to keep pressure the Chinese economy as a whole using the trade war through increases the tariff and US try to decrease the level of China’s goods and services export to a foreign country, US also prohibited the company who doing business with US to do business with China at the same time. These US’s actions purposing to make the China economy power decreases and resulted in inadequate China to develop high-technological and Made in China 2025 failed. This case will impact the danger crisis and destabilization around the world, even though the real impact impossible to predict but it may generate the new worldwide economic crisis. Globalization may be preventing the large wars but also can provoke the cold war between two or more countries. The global economy related to the global supply and globalize production location, so the trade war does not only influences the economy of US and China but non-US and non-China can be hurt also especially for multi-national companies (MNCs).

China-US Trade War and Investment Strategy

The trade war has impacted in a global economy, so the investor should make their strategy wisely. A China-US trade war will destroy both sides, if China stop buys Airplane and soybeans from the US, 180,000 American people could be lost their jobs and also could lead to the loss of local jobs up top 10% (Jin, 2017). Unlike The US, China is in a good position to face the trade war result (Dollar, 2018). If GDP per capita of China increase and can reach a half of GDP per capita of US, it will be the disaster for the US because GDP per capita times the high population number of China can make China reach twice of US’s GDP. According to these perceptions, an investment banker could choose to invest their fund to China companies rather than US companies or to invest to non-US and non-China companies that unrelated to China and US import-export business.

References

  1. Amadeo, K. (December 4, 2018). Trade Wars and How They Affect You: Why Trade Wars are Bad and Nobody Wins. Retrieved from https://www.thebalance.com/trade-wars-definition-how-it-affects-you-4159973
  2. Breslin, S. (2007). China and the Global Political Economy. New York: Palgrave Macmillan.
  3. China Policy. (2017). China Going Global: between Ambition and Capacity. Beijing: China Policy.
  4. Dodwell, D. (September 5, 2018). The Real Target of Trump’s Trade War is ‘Made in China 2025’. Retrieved from https://www.scmp.com/business/global-economy/article/2151177/real-target-trumps-trade-war-made-china-2025
  5. Dollar, D. (July 9, 2018). The Future of the U.S.-China Trade war. Retrieved from https://www.brookings.edu/blog/order-from-chaos/2018/07/09/the-future-of-the-u-s-china-trade-war/
  6. Gray, A. (March 9, 2017). The World’s 10 Biggest Economies in 2017. Retrieved from https://www.weforum.org/agenda/2017/03/worlds-biggest-economies-in-2017
  7. Jin, K. Y. (6 April, 2017). America’s Coming Trade War is based on a Misunderstanding of Both China and Economics. Retrieved from https://www.globalpolicyjournal.com/blog/06/04/2017/america%E2%80%99s-coming-trade-war-based-misunderstanding-both-china-and-economics
  8. Kennedy, S. (June 1, 2015). Made in China 2025. Retrieved from https://www.csis.org/analysis/made-china-2025
    Laskai, L. (March 28, 2018). Why Does Everyone Hate Made in China 2025? Retrieved from https://www.cfr.org/blog/why-does-everyone-hate-made-china-2025
  9. Liu, T., & Woo, W. T. (2018). Understanding the U.S.-China Trade War. China Economic Journal, (11):319-340. DOI:10.1080/17538963.2018.1516256.
  10. Nolan, P. (2004). Transforming China: Globalization, Transition and Development. London: Anthem Press.
    What is Globalization? (n.d.). Retrieved from http://www.globalization101.org/what-is-globalization/
    Yue, J. Y. (May 24, 2012).
  11. What does Globalization Mean for China’s Economic Development? Retrieved from https://www.globalpolicyjournal.com/blog/24/05/2012/what-does-globalization-mean-china%E2%80%99s-economic-development
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