Impact of President Donald Trump's Protectionist Policies on US-China Trade Relations

Running Head: MICROECONOMICS 1
MICROECONOMICS
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MICROECONOMICS 2
Question1 Summary
The article generally argues that the implementation of President Donald Trump
protectionist policies against China and its trading partners would severely affect the economies
of both nations. From the article, it is clear that the United States and China do not have any
bilateral trade agreement. President Donald Trump might accuse China of dumping its imports in
the United States through Chinese heavy subsidization of imports which are sold at cheaper
prices in the United States killing some of its industries. Trump might decide to take actions
directly against China by not following the World Trade Organization rules if they go against his
decisions. China might also retaliate and investigate the safety problems the United States food
exports have. Trump had announced an imposition of 45 percent tariffs on imports from China
which is against the World Trade Organization rules and this will obviously make China retaliate
without any official ruling and curb agricultural products from the United States such as the
soybeans. This is likely to result in a trade war between these two nations (Hughes, 2015). The
American consumers will have to suffer by paying high prices on Chinese imports. Some
American companies relying on input imports from China will also suffer due to reduced
subsidized cheap Chinese inputs (Mansfield, 2017). The United States might benefit by
collecting more tax revenue due to the high tariffs imposed.
Question2
a. “To develop and assess student skills in economic analysis of real-life situations”
b.
Real life economic situations have been discussed in the article. For example, President
Donald Trump has gone against the world trade organization rules by imposing a 45 percent

MICROECONOMICS 3
tariffs on Chinese imports. On the other hand, the Chinese government has reacted by retaliating
and imposing tariffs on the American agricultural products such as the soybeans. The Chinese
government has also tightened its safety inspection of the American food exports. The above
scenario analyzes real-life economic situation whereby nations in international trade are trying to
outdo each other and maintain a favorable balance of payments (Barbieri & Levy, 2015).
Question3
Various economic theories can be linked to the learning objective identified. They
include mercantilism, absolute advantage and global strategic rivalry theories. The most suitable
relevant economic theory is the mercantilism theory. This theory states that the main aim of
every country in international trade is to have a trade surplus with its counterparts (Ekelund &
Tollison, 2015). One of the major ways which can be used by nations in promoting their exports
is by imposing trade restrictions such as tariffs on their counterparts’ imports. This is called trade
protectionism and is what has been discussed by the article. The United States under the
leadership of President Donald Trump has planned to impose a 45 percent tariffs on the Chinese
imports to balance their trade with China as they have recorded trade deficits for the past years.
China has heavily subsidized its products in order to boost its exports by selling much at lower
prices to America. This act has been viewed as unfair by Donald Trump. American consumers
will have to suffer by paying higher prices for domestic goods and services as some American
industries suffer from reduced imports which they use as factor inputs (Anderton & Carter,
2014). This has been illustrated in the diagram below: