Impact of Free Trade on Economic Growth: Lessons from China-US Trade War

GLOBAL BUSINESS ENVIRONMENT
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The recent policies of Trump administration have brought the issue of free trade to the
forefront. On one hand, President Trump claims that the levying of these trade tariffs on key
imports would lead to progress for America but the underlying statistics along with corporate
action suggest otherwise. Owing to imposition of tariffs by US on key raw materials such as
steel , there is increased cost for various industries in US which are users of steel particularly
automobiles. This is leading to loss of competitive advantage apparent from decision of
companies such as Harley Davidson to shift their production outside US thereby saving on
costs. Further, the US based exporters particularly automobile manufacturers such as Tesla
are also planning to set up manufacturing facilities in China so as to escape tariff (Whitley
and Curran, 2018).
The economic impact of the potential trade war that is raging between US and China is
indicated below (Whitley and Curran, 2018).
It is apparent from the above diagram that imposition of trade tariffs clearly has significant
adverse impact on the economic growth of the nations. Also, it is evident that the country
imposing these tariffs (i.e. US) tends to suffer more in economic terms as compared to the