Impact of US-China Trade War on International Businesses

Running head: INTERNATIONAL BUSINESS GROWTH AND TRADE WARS
INTERNATIONAL BUSINESS GROWTH AND TRADE WARS
Name of the student
Name of the university
Author note

INTERNATIONAL BUSINESS GROWTH AND TRADE WARS1
Topic: Impact US-China trade war on international businesses
The growth of the global trade operations have slowed down sharply through the US-
China trade conflict. Li, He and Lin (2018) opined in a research that the tariffs that were
introduced during the trade war minimized 50% of the bilateral trade relations between US and
China, which has affected the supply chains of most of the companies. On the other hand,
Handley and Limão (2017) opined that the bilateral tariffs have altered the structure of global
competitiveness through improvements in the import and export patterns. It has also being noted
that the US-China trade tensions have assisted the EU in increasing the rate of exports amounting
to around about $70 billion of US-China bilateral trade (Swanson 2018).
US imported computers, androids and apparels from the different organizations in China
costing around $540 billion (Tankersley and Bradsher 2018). Most of the units are designed and
manufactured by the US firms in china but are still considered as the imports. For an example,
the Apple Inc. products are mostly manufactured by the US based organization in the Chinese
markets for reducing the cost of operations (Noland 2018). However, the implementation of the
trade tariffs affected the rate of operations of Apple inc. while continuing with their production
lines in China. Therefore, the research aimed at identifying the impact of the US- China trade
wars on the economic growth of the nations and the international businesses.
Gordon (2017) stated in a research that the implementation of the trade tariffs increased
the barriers to commence open trade between the nations and its alliances. The enhanced rate of
restrictions affected the rate of operations of the venture while making a market expansion. The
administrators of the trade wars prioritized the Made in China 2025 plan and thereby instructed
China to stop subsidizing 10 industries (Posen 2018). The Made in China 2025 plan included

INTERNATIONAL BUSINESS GROWTH AND TRADE WARS2
development of the robotics, aerospace, and software industries and thereby China would never
miss the development of world's primary artificial intelligence center by 2030 (Paletta and
Swanson 2017).
Figure 1: Global Trade and the US- China Trade conflict
(Source: Fidler 2017)
On the other hand, the enumeration of the steel tariffs by the US (25% tariff on steel 10%
tariff on aluminum imports) have threatened the capacity of America in improving the quality of
the weapons (Ikenson 2017). It has been noted that America is the world’s largest steel importer
for supporting the auto manufacturing businesses. However, the implementation of the steel
tariffs lowered second quarter profits for most of the firms in US. In order to deal with the
situation and adhere to the interests of the relevant stakeholders, the costs that were incurred by
the different organizations were transferred to the consumers.

INTERNATIONAL BUSINESS GROWTH AND TRADE WARS3
It has been researched that Trump’s administration imposed three tariffs on a total of
$250 billion Chinese import goods (Athukorala 2017). The tariffs enhanced the situation of
conflict between the two nations leading to an additional cost of the average households to $419
per year (Miura and Weiss 2016). The imposition of the tariffs not only affected the bilateral
trade relations between the two countries but also maximized the cost of offerings for the
customers. On the other hand, China imposed a 25% tariff on $60 billion of the US goods while
selling off $1.13 trillion in US debt (Tow 2017). The situation will result to an enhanced level of
interest rates while slowing the economic growth of the international MNEs. The imposition of
different tariffs on the essential commodities has affected the growth and expansion of most of
the US companies that allied with the Chinese firms for minimizing the operational costs.
The US- China trade war has affected the rate of petroleum imports from the different
countries. It has been noted that the most common industry that was affected through the
increasing rate of tariffs was the technological and AI systems development industry which will
be affected through the exposure of China to the enhanced tariffs. Talley and Mauldin (2017)
opined that most of the companies like Apple, Samsung, and Nokia mostly rely on the Chinese
firms for manufacturing low cost products like Androids, smart televisions and other electronic
gadgets which is challenged through the enhanced rate of the tariffs.
On the other hand, a large number of countries depended on China for the low cost
manufacturing of the different electronic gadgets and units. The increased rate of tariffs affected
the capabilities of the organizations in the supportive nations in manufacturing the units in a
lower cost. Dixon (2017) opined that the development of the tariff system and the enhancement
of the trade restrictions have enhanced the costs of productions in China which resulted to a
slowing economic growth. On the other hand, the cost of production was levied on the