America and China. Two economic powerhouses. The biggest in the world. Now they’re at each other’s throats.
How did we get here? What are the reasons behind this trade war? And what are the consequences?
It’s impossible to miss the headlines. To date, the US has imposed over US$550 billion worth of tariffs on Chinese products.
President Donald Trump’s goal? To punish China for a wide range of offences, ranging from the trade deficit to intellectual-property theft to currency manipulation.
In this manner, Trump wants to force Chinese president Xi Jinping to the negotiating table. The endgame will be new trade rules that are more favorable to the American economy.
However, Xi Jinping is certainly not taking any of this lying down. China has fought back by imposing US$185 billion worth of tariffs on US goods.
This escalation looks set to continue, with nationalistic pride being amped up, and businesses being caught in the crossfire.
What does the trade war mean for the American economy?
The US and China are each other’s largest trade partners. As they exchange blows, stock markets have been taken on a wild ride.
How has the American economy suffered?
It has happened in 4 ways:
- GDP growth is slowing
- Manufacturing is struggling
- Exports are falling
- Employment is shrinking
Tariffs have certainly taken a toll on Americans businesses. Manufacturing has fallen by over 49% this year. Many companies are laying off staff as demand deteriorates.
In August 2019, only 130,000 jobs were created, far below the initial projection of 160,000. That’s over 18% less than expected. This marks a significant decline in employment.
What does the trade war mean for the Chinese economy?
Meanwhile, China has also suffered declines in key areas.
In September 2019, data showed that manufacturing has deteriorated for five months in a row as consumer confidence continues to slump.
Further data reveals that Chinese industrial output is now at its lowest point in almost 20 years.
Anecdotal evidence suggests that factories relying on low-skilled workers have been hit particularly hard.
Who is losing the trade war?
Although both the US and China are suffering from this trade war, it looks like the US is taking a bigger hit.
- US exports to China have fallen by 26%
- Chinese exports to the US have only fallen by 13%
Clearly, the single biggest factor here is that the US is not producing as much consumer goods as China. The balance trade was, and continues to remain, wildly uneven.
However, Donald Trump is determined not to give in. He vows to continue the trade war until a suitable compromise can be reached.
Xi Jinping, for his part, has so far refused to come to the negotiation table with anything substantial.
Where can I find more information on the trade war?
You can keep up to date on this developing story by visiting .
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