President Donald Trump has expressed his disappointment with China for a while now. One of the major concerns is the currency devaluation strategy : “Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into…” 1Donald Trump on Twitter : https://twitter.com/realdonaldtrump/status/805538149157969924?lang=deAs explained in the previous article, China is artificially keeping its currency at low value to keep the exports running. A low exchange rate attracts foreign investors from abroad and helps China to maintain its status of the world’s factory for low production costs, which is good for China’s economy.

US Fears Retaliation

Trumps economic advisor Larry Kudlow believes China is not playing by the rules and suggests counter measures. One way for the Trump administration to react is to impose tariffs on imports from China. These can be tariffs on solar panels, steel, aluminium, electronics, apparel and footwear. Trump can also limit the Chinese investment in the US or impose visa restrictions for Chinese students. However, the major concern is a retaliation from Chinese side despite the unfair practises. U.S. trade associations therefore suggest not to impose any tariffs, because this will harm U.S. companies, workers, farmers, investors and consumers in the first place.2Layne,Rachel (2018) CBS News : https://www.cbsnews.com/news/economic-war-with-china-the-risks/

Who Is Going To Lose The US-China Trade War ?

The US-China trade relations are not competitive, but rather complementary. This means there are only losers but no winners. Since the year 2000 the US is gradually dependent on the US imports. Assumed US will raise tax for Chinese industries up to 15%, China would lose 47,5 billions $. In case of 45% a total loss of 165.8 billions is estimated. China on the contrary would impose limitations on US primary products and labor market, which can cost up to 75 billions $. While China seems to have more at stake, american multinational companies exported around 8,5 billions $ from China. This means a 45% tax or tariff raise will harm american multinational corporations in first place with a total loss of approximately 5,766 billions $.3Zhang Xiaobai (2018) : Der chinesisch-amerikanische Handelskrieg : Wer schadet wem mehr ? China Rundschau, Wirtschaft 03

 

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 5 other subscribers

References   [ + ]

1. Donald Trump on Twitter : https://twitter.com/realdonaldtrump/status/805538149157969924?lang=de
2. Layne,Rachel (2018) CBS News : https://www.cbsnews.com/news/economic-war-with-china-the-risks/
3. Zhang Xiaobai (2018) : Der chinesisch-amerikanische Handelskrieg : Wer schadet wem mehr ? China Rundschau, Wirtschaft 03

Leave a Reply

Your email address will not be published. Required fields are marked *