Impact of US-China Trade War on Cisco Systems

Essay

Table of Contents
Introduction .....................................................................................................................................1
US-China trade war..........................................................................................................................2
Conclusion.......................................................................................................................................8
References......................................................................................................................................10

Introduction
Trade is referred to the basic economic concept which involves buying as well as selling
of services and goods in which compensation is paid by buyer to seller. It takes place in an
economy among consumers as well as producers. Along with this, international trade assist
countries within expanding their markets in context of services which might not be available
within it (Ciuriak, 2019). It leads to enhanced market competition which brings down prices of
home products for their customers. Trade war occurs when one firm retaliates against others by
enhancing restrictions or import tariffs. The word tariff denotes duty or tax which have been
imposed on goods which are being imported to nation. In context of global economy, trade war is
destructive for both businesses as well as consumers and also on their economies. Basically, it
takes place when one country enhances tariff on imports made by other country as a response to
enhanced tariff from first country. Rationale behind this is secure national interest as well as
render advantage for domestic businesses.
The trade war in between China and United States leads to enhanced economic disputes
among economies of two nations. The reasons behind this was the unfair competition practices
which were being carried out by China. Firms or corporations were taking advantage of open
market in America but China kept their market closed for American products and corporations
(Friedman and McCormick, 2015). This created an unfair competition due to which there was
factory closures, job loses and minimised output within the American industries. This made
America to impose taxes on trades against Chinese companies as well as their products as there
was no other option. This report is based on Cisco systems which is a public company and deals
within networking hardware & software industry. This was founded on 10th December, 1984by
Leonard Bosack and Sandy Lerner. They are headquartered in California, United States and
deliver their services worldwide. Cisco Systems are responsible for development, manufacturing
as well as selling of networking hardware, high technologies and telecommunication equipments.
They are specialised within specified tech markets like domain security, energy management and
internet of things (Ojo, 2016). After the trade war in between US-China, the Cisco systems have
slashed their manufacturing within China due to higher import tariffs which are levied within
US. In this aspect, Chinese government has controlled firms for opting for American-owned
companies and go for services which are being offered by local vendors. This created an
influence on the way in which Cisco Systems render their services within China and this can be

understood by the figure that have been decreased by 8.6%. Though there is smaller part of
business but still when it falls down then it creates a challenge. This report comprises of details
related with US-China trade war, theories with respect to international business along with three
factors with respect to this and the ways in which these creates an impact on new subsidiary will
be illustrated here.
US-China trade war
The bilateral trade agreement occurred in between China and US in 1979 & diplomatic
relations were re-established. This lead to rapid enhancement of trade among these two countries
which started from $4 billion and reached to over $600 billion in year 2017 in terms of both
imports & exports (U.S. Trade with China: Selected Resources, 2019). Till February 2019, China
was one of the largest trade partner of US. The exports from China over decades have altered in
terms of labour intensive and low value products or services to enhanced capital modifier goods.
This acts as major suppliers to US in terms of global supply chains as well as enhanced
technology products. China is one of the largest treasury security holder of United States. But
due to unresolved influences which revolves around bilateral trade among two countries has
created trade deficit (He and et. Al, 2019). The volume of imports which were made by China
went up immensely in comparison to exports made from US. This trade deficit became an issue
for policymakers as well as economists. It was identified as unfair trade practices and US took
different measures so that this trade imbalance can be maintained.
The tariffs policy emphasise their customers for buying goods or services rendered by
America by making the imported products costly. The US have forced tariff of around $360
billion on Chinese goods on the other hand China imposed near about $110 on US products (A
quick guide to the US-China trade war, 2019). In 2001 China joined World Trade Organisation
in which an agreement took place according to which the later is liable for enhancing economic
interests of America. But China was not able to acknowledge the rules and they were supposed
to address trade grievances with Washington. The key issues were that China was leading source
for pirated video laser, compact disks and all the computer software were sold virtually within
there (Ross, 2016). There was no enforcement of written laws due to which it costed American
firms with around $1 billion every year. Tariffs were minimised by China but still they went
within stealing the IP (intellectual property) as well as American firms for transferring
technology for accessing Chinese market which acts as violation of rules of WTO (Hosain and