Economic Environment in the United States and China

Running head: ECONOMIC ENVIRONMENT
Economic Environment
Name of the Student
Name of the University
Author note

ECONOMIC ENVIRONMENT1
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Trade imbalance between US and China.....................................................................................2
Theft of intellectual property and technology transfers...............................................................3
Evaluation of economic reasons given by Trump.......................................................................3
Conclusion.......................................................................................................................................5
Reference List..................................................................................................................................6

ECONOMIC ENVIRONMENT2
Introduction
When import tariffs or other restrictions are placeed on the imports of one country by
another country to protect domestic business and market, it triggers a trade wab between two
countries as the other nation retaliates in the same way. A tariff of 25% imposed on China, which
is worth $50 billion on 818 categories of goods on 6th July, 2018 by trump administration (Amiti,
Redding & Weinstein, 2019). The two major reasons of trump trade war included trade
imbalance between US and China and theft of intellectual property by China. The trade war
between two countries US and China are likey to have impact on both the economies as well as
the global economy.
Discussion
Trade imbalance between US and China
Trade imbalance between US and China recoded at $419.5 billion on 2018. To reduce the
trade gap US imposed 25% tariffs on China’s 128 categories of goods such as airplanes, pork,
cars, aluminium and soybeans and 15% tariffs on nuts, fruits and steel piping, as China buys few
goods and services from US.
In response, China imposed same amount of tariffs on imports from the US. China used
tariff free global supply chain (GVC) for most of its export production where a large group of
countries manufactured collaboratively. The tariff imposition affected not only the exporters to
the US but also all countries globally. The effectiveness of GVCs reduced significantly as the
custom clearances delayed due to the tariffs by participating countries. However, initially China
agreed to increase purchase from US to substantially reduce trade deficit and expand intellectual