International Business Assignment 2022

Running head: INTERNATIONAL BUSINESS
International Business
Name of the Student
Name of the University
Course ID

INTERNATIONAL BUSINESS1
Table of Contents
Introduction................................................................................................................................2
Summary of KPMG report.........................................................................................................2
Subsequent development of US-China trade disagreement.......................................................3
Scenario analysis........................................................................................................................5
Scenario 1...............................................................................................................................5
Scenario 2...............................................................................................................................6
Scenario 3...............................................................................................................................7
Conclusion..................................................................................................................................7
References list............................................................................................................................9

INTERNATIONAL BUSINESS2
Introduction
The ongoing trade escalation between US and China attract a great amount attraction
of economists due to its impact on domestic and global economy. The trade war began as US
president Donald Trump implemented a large tariff on different imported goods of China.
The economic rationale as given by President Trump behind the imposition of tariff was to
design a fair trade deal for supporting the economy of US. The policy focuses on encouraging
consumers in United State to use goods that are produced within the economy (assets.kpmg,
2018). Several rounds of tariff retaliations have already been done by both the nation. This
paper aims to summarize the key findings of KPMG report related to the impact of trade war.
Along with this, the paper analyzes the progress so far made in the trade disagreement.
Moreover, impact of the trade escalation has been discussed considering three separate
scenarios.
Summary of KPMG report
World’s two largest economies, the China and US, are engaged in trade war since
2018. Many rounds of trade talks initiated to resolve growing economic tensions between two
countries. The consequences of tariff imposition impacted the economies of both countries.
To reduce the trade gap US imposed 25% tariffs on China’s 128 categories of goods worth
US$34 billion and later it imposed another 25% tariff on Chinese goods worth US$16 billion.
In response, China also imposed retaliatory tariffs of same amount on US imports. If the two
countries continued 25% tariffs on all products traded then the GDP of both countries would
be lower by 1% than the GDP without tariff imposed (Berthou, 2018). The series of tariffs
imposed by US and China on each other created negative impact on the economies of both
the country as well as the world. The trade war between US and China will impact the world
economy if other country also started tariff imposition. The effect of tarde war on global

INTERNATIONAL BUSINESS3
economy will be below -0.5% of world GDP and the entry of other country in trade war will
contract world GDP by greater than 3%.
The US economy witnessed recession and over five years annual growth rate would
1% slower due to trade war. While, China’s economic growth will reduce to 4% per annum
and it will be less than 5% per annum for almost five years. The escalation of the trade war
impacted Australia significantly with a loss of around 60,000 job, lower real wage about $16
per week and loss of almost half-a- trillion dollars national income over ten years. Joinig of
other countries in the trade war may resist the negative impact (Ross, 2016). The country
mainly affected as the China uses Australian goods as intermediate inputs in its production
process and it provide many services exports in tourism and education to China. The GDP of
Australia will be 0.3% lower after fiver years and it will incur loss of A$36 billion real GDP
over a decade. The continuous trade war escalation will result in real GDP loss of Australia
by almost 0.5%.
US imposed trariffs on goods import such as aluminium and steel from the Canada,
EU and Mexico. They also imposerd retaliatory tariffs on US. However, the impact of trade
war would be less severe on Jpaan and European Union than Australia.
Subsequent development of US-China trade disagreement
The disagreement between the two nations started in June 28, 2016 as Trump
announced to counter balance the unfair trade offence at Pennsylvania and posed a threat to apply
tariffs in sections 201 and 301. In 31st March 2017, Trump approached for two orders showing a
fall in stock index of 0.23 percent. One required tighter tariff and anti-subsidy and dumping
trade (Glaser & Flaherty, 2018). While the former with a review the causes of U.S. trade
deficits. In their first meeting on 7th April, 2017 U.S. President Trump and Chinese President