Impact of the US and China Trade War.

Running head: Impact of the US and China Trade War
Impact of the US and China Trade War
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Impact of the US and China Trade War1
Table of Contents
Introduction......................................................................................................................................2
Social and economic impact of the trade war on the US and China................................................2
Policies taken by the US and China.................................................................................................5
Possible outcomes of the trade war.................................................................................................8
Conclusion.......................................................................................................................................9
Reference.......................................................................................................................................10

Impact of the US and China Trade War2
Introduction
The essay pertains to the discussion of trade war between the US and China. The trade
war started in 2018 when the president of the US Donald Trump imposed tariff on imports from
China. This imposition of tariff increased the price of the goods imported from China and owing
to that, the consumers decreased consuming Chinese products (Hoda, 2019). Therefore, the
export demand of China declined significantly, which further causes the income of the country to
fall and thereby the GDP decreased as well. The tariff was imposed by the US with an objective
of boosting the domestic industries such that the employment in the country increase and the
competitiveness of the industry of the country increase as well. However, in response to the tariff
imposition by the US, China retaliated and imposed tariff on the imports from the US. This
mutual tariff imposition on each other initiated the trade war between the concerned two
countries. This essay puts emphasis on this trade war and discusses about the impact posed by it
on both the countries. The economic and social aspect of the impact of the trade war is been
covered in the essay. The analysis of the policies taken by the countries to deal with the impacts
of the trade war is the part of discussion of this essay. Finally, the essay further discusses the
about the possible outcomes that will be visible in case of both the US and China. Thus, the
essay discusses the impact of trade war between the US and China and its outcome.
Social and economic impact of the trade war on the US and China
The US was the initiator of the trade war between the US and China. At first, a 10% tariff
was imposed by the US on the imports from China worth $200 billion (Bown, 2019). Owing to
this, the export demand of China declined. The retail sales growth of China slowed down to
8.1% which is the lowest in the last 15 years. The industrial growth also slowed down to
5.4%and is the lowest in the last ten years. Apart from that, the GDP rate of China has also faced

Impact of the US and China Trade War3
low growth rate at 6.5%. This GDP growth rate is the lowest in ten years. Therefore, it is evident
that the trade war has significantly impacted the economic condition of China (Bown & Irwin,
2019). In addition to that, the situation becomes more severe for China when the US increased
the tariff rate further to 25% on $300 billion worth of imports from China. The economy of the
country faced more difficulties and the adverse condition get aggravated (Silver, 2018). The
GDP growth rate has gradually declined after the initiation of trade war. Similarly, the trade war
has also impacted the US adversely and the GDP growth rate of the country has fallen (Mao &
Görg, 2019). Apart from fall in income and loss in GDP growth, the industries of the country that
depends on the imports from the China are a suffering loss and increase in cost of production.
Due to this the price of the products are also increasing and with the induced effect, the demand
falls (Li, He & Lin, 2018). Therefore, it is evident that economy of both the country faced
economic downturn. China majorly use to import agricultural product from the US whereas the
US imports technology based and spare part products from the China. Thus, it is easier for China
to import the goods from other countries that is used to import from the US but the case is not
easy for the US (Marchant & Wang, 2018). Consequently, impact on the US has been greater
than in the case for China. The impact of the trade war can be discussed more effectively with
the use of aggregate demand (AD) and aggregate supply (AS) model. The imposition of tariff on
imports of both the countries would impact the domestic prices (Bolt, Mavromatis & van
Wijnbergen, 2019). Owing to this, the price of domestic substitutes of the import goods from
China would increase and in addition to that, the price of the export goods, manufacturing of
which depends on the Chinese goods increases. Cumulatively, the demand for all these goods fall
that has led to fall in aggregate demand of economy of both the country (Waugh, 2019). The fall
in aggregate demand lowers the profitability of the firms and perceiving the future fall in revenue