US-China Trade War: Impact and Scenarios

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

1INTERNATIONAL BUSINESS
Table of Contents
Introduction......................................................................................................................................2
Summary findings of KPMG report and other media coverage......................................................2
Development of US-China trade disagreement...............................................................................4
Modelled scenario in the context of US-China trade war................................................................5
Limited escalation, no contagion.................................................................................................5
Full escalation, no contagion......................................................................................................5
Full escalation, full contagion.....................................................................................................6
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

2INTERNATIONAL BUSINESS
Introduction
In the most recent period, one significant event in the world trade history is the trade
battle between US and China. President Donald Trump has imposed a considerable large tariff
on imported items from China, Canada, Mexico and the EU. The objective is to make a fair trade
deal for US and encourage Americans to purchase domestically produced goods. The trade war
started with US’s decision to impose three rounds of tax on import of Chinese product in the last
year. The estimated value of import from China was $250 billion. The first two rounds contained
25 percent tariff on imports worth $50 billion from China and Beijing (bbc.com, 2019). The third
set of tariff was imposed on China’s good valued $200 billion. The report summarizes key
findings of KPMG report covering the aspects of US-China ongoing trade war. The paper
discusses subsequent development on trade disagreement and evaluates these developments in
reference to three scenarios modelled by KPMG.
Summary findings of KPMG report and other media coverage
KPMG on August 2018 published a report to discuss aspects related on trade war
between China and US. China and U.S are two of the largest economies in world. They are now
involved in a trade war against each other. The last round of trade discussion between China and
US in Washington DC failed to solve the ongoing trade tensions between the two countries. The
economic modelling done by KPMG economists indicate a negative impact the trade war on both
US and China as well as on the global economy (Rynne, 2018). The estimation suggests if the
trade remained limited between China and U.S then the adverse impact on the world economy
would be restricted below -0.5 percent on global GDP. The effect would be larger if the effect of
trade wars spread to other countries. In this case, world GDP is likely to be squeezed by more
than 3 percent. The contagious effect of trade war can cause a severe downturn of the world