US-China Trade War

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
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Introduction
Trade War is a political conflict between the two biggest economies in the world, China
and United States of America. The conflict aroused when US President, trump announced on
putting huge amounts of tariff on imported goods from China. China has been accused of
undergoing unfair trade practices against the US economy that has made US, impose punitive
tariffs on its goods. US people has a high demand for Chinese products, which have increased
the trade deficit of US. Most of the inputs for these goods are exported from US to China. Thus,
it leads to a technological transfer of US goods to the Chinese economy.
In order to stop this dependency on the Chinese products, US started imposing greater
amounts of tariff on the Chinese goods and force people to use the Chinese goods. On the
contrary, China responded by imposing huge amounts of tariffs on the US goods as a retaliation
effect of US trade restriction policies (South China Morning Post.com 2018). China blamed US
for trade war which has significantly hampered the level of GDP and export earnings of global
economies. This has affected the performance of business environment in the global market. A
significant impact has been seen in Malaysia, who heavily relies on China for its earnings. The
aim of the paper is to explore and understand the spill-over effects of trade tensions on Singapore
economy.
Discussion
China and Singapore has quality relationship with each other due to their forced
agreements in free trade and exchange of goods and services in the economy. Singapore has
joined the people’s republic of China that provides and assists Singapore with various services
and trainings that helps the economy to maintain an advancing rate of growth. China provides a
wide range of facilities for the people of Singapore such as providing military training,
education, investment, trading structure and many more. Singapore has supported China for the

establishment of peaceful developments in the regions (The Economic Times. 2019). Moreover,
Singapore depends on China for the provision of goods and services that could only be given by
China at a lower price.
Dependency of Singapore on US and China
The products mostly comprise of advanced technological goods in which China has
comparative advantage and produces at a lower cost than most other economies. However, trade
conflicts between US and China have affected the overall performance of Singapore economy.
Figure 1: Trend in the growth rate of Singapore
Source: (Tradingeconomics.com. (2019).
The Singapore economy is heavily dependent on imports from China for various products
such as Crude Petroleum, Refined Petroleum, Computers, Integrated Circuits and Gold.
Singapore exports huge amounts of non-oil exports to China which makes up most of its
earnings for Singapore (Sen, 2019). The trade war has made an impact on the overall trade
market by making quality changes in the exchange of goods among economies. As a result,
goods could not be transferred from one country to another such that demand and supply of gods

are highly affected by the change in market demand and supply of goods among the economies
which resulted in a fall in Singapore growth rates, as shown in Figure 1. For example, the value
of exports went down by 8.9% in August, 2019, which further went down by 4% in next three
months. This has resulted in a sharp increase in the value of trade deficit, which can be seen from
the aggregate fall in balance of payments.
The effect of US-China trade war on Singapore
The economy of Singapore is heavily dependent on non-oily exports, which makes up
most of Singapore’s annual revenue and generates the economic growth. US is the largest
investor of Chinese economy and China serves as the greatest trading partner of US. These two
big economies acts as the sole center for business developments due to their high resource value
and provision of goods at low opportunity costs (Tradingeconomics.com., 2019). The growth of
other economies are significantly dependent on the growth of China and US, which serves as the
power house for business development. Singapore is one of the greatest economies to be greatly
affected by trade tensions because Singapore economy is mainly focused on the export and
import to US and China respectively.
Figure 2: Change in the rate of Balance of Payments (BOP) after the Trade War