Strategic Management and Leadership

This article discusses the impact of the US-China trade war on the oil market and its far-reaching effects on other companies and markets. It also relates the topic to strategic management and leadership.

Running head: STRATEGIC MANAGEMENT AND LEADERSHIP
Strategic Management and Leadership
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 A brief summary of the event
The news published in CNN Business by Matt Egnan on August 6, 2019, is
titled, “How Trump’s trade war could crush oil prices” (Egan 2019). The
trade between the two largest economy of the world is increasing in intensity.
Due to the less than satisfactory trade practices in china has led US to
increase tariff for Chinese goods exponentially. Evidently, the oil market all
over the world is about to take hit due to their tariff competition. Merrill
Lynch of Bank of America predicts that China would soon retaliate against
the US increase in tariff by buying the oil in large scale from Iran thus
overlooking the OPEC nation sanctions of Washington. This would affect the
price of crude and refined oil severely. It is expected that a barrel of oil will
drop down to $40 from $60. Due to the increasing tariff, China already have
announced their halt in the purchase of US agricultural goods. During the
trade war, the oil export from Iran has already reduced and the experts believe
that it will dwindle further. Despite all that, Matt Smith, the director of
commodity research at ClipperData believes that China will not initiate any
action that will create open provocation to the US as they are aware that US
might sanction any major Chinese company their supply of Iranian oil that
would destroy their effort to one-up US in this trade war.
 How will the event affect other companies or markets?
This event has far-reaching effect on other companies, big or small. First of
all, the increasing tariff rate is already impacting the industries (Francois et al
2015). People doing business that have manufacturing units in China and
market in US are facing steep competition as their product price is increasing
slowly. Now, as the experts imply severe decrease in oil prices, and US’s

2STRATEGIC MANAGEMENT AND LEADERSHIP
subsequent retaliation would further poison the relationship of the two
countries thus, prolonging the trade war. Due to the trade scenario, many
businesses of China have stopped exporting their goods in order to ensure that
they are not running on loss. This has affected the US industries as well.
Many US based companies also have Chinese manufacturing or supply units
(Autor, Dorn, and Hanson 2016). These products have now become costly
thus increasing the prices of several goods in US as well. The decreasing oil
price means many countries now will buy oil from China rather than USA and
that will impact the US economy greatly. Much of the economic growth that
they have is due to oil export and subsidy to different companies. Moreover,
if this war continues, many companies that depended on Chinese
manufacturing for their supplies will have to find alternative sources. Many
businesses all over the world are likely to face the effects of US-China trade
war in near future (Li, He and Lin 2018).
 How does the news illustrate the topic assigned?
The topic assigned, strategic management and leadership is related to the
news that has been described. The trade war affects all businesses all over the
world. Most of the manufacturing units are located in China and thus all
products that are coming from those units falls under tariff. This increase in
price will affect the organizations. the leaders and managers of the
organization would need knowledge and skill to manage the import and
export of the organization and maintain the price. They will have to choose
strategies about price so that they are able to earn profit in the highly volatile
market (Amiti, Redding and Weinstein 2019). This topic will provide them
with the insight and necessary knowledge that will enable them to create

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strategic business plan for the success of their organization. This topic also
gives knowledge about leadership in an organization. Due to the global nature
of the companies nowadays, the leaders will also learn about the leadership
methods that can direct an organization to better future.
 What can be learnt from the event? How does this news contribute to a better
understanding of the assigned topic?
From the event that has been discussed above teaches us that the decisions of
two leading economies can have far-reaching effect on the economy of the
world. The decisions that these two countries have taken and will take will
impact the small, medium and large firms.
This news makes a better understanding of the assigned topic as this war trade
in China is also an example of strategic planning and negotiation that is a part
of business strategic planning. Just as Trump is aiming for the betterment of
US economy and market, the leaders of an organization too, has to focus on
the betterment of their company.
 Can you predict future development?
There can be two outcomes of this event. One, US loosens the tariff and both
the countries are able to come to a negotiation. China improves their trade
practices, thus improving the overall condition of the market. Two, US might
retaliate by sanctioning one of the Chinese agencies to Iranian oil, thus,
destroying China’s strategy (Klettner, Clarke, and Boersma 2014). This will
affect the oil prices further to a hike and Chinese economy is likely to be
affected.

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References
Amiti, Mary, Stephen J. Redding, and David Weinstein. The impact of the 2018 trade war on
US prices and welfare. No. w25672. National Bureau of Economic Research, 2019.
Autor, David H., David Dorn, and Gordon H. Hanson. "The china shock: Learning from
labor-market adjustment to large changes in trade." Annual Review of Economics 8 (2016):
205-240.
Egan, Matt. 2019. "How Trump's Trade War Could Could Crush Oil Prices". CNN.
https://edition.cnn.com/2019/08/06/business/oil-prices-trade-war-iran-china/index.html.
Francois, Joseph, Miriam Manchin, Hanna Norberg, Olga Pindyuk, and Patrick
Tomberger. Reducing transatlantic barriers to trade and investment: An economic
assessment. No. 1503. Working Paper, Department of Economics, Johannes Kepler
University of Linz, 2015.
Klettner, Alice, Thomas Clarke, and Martijn Boersma. "The governance of corporate
sustainability: Empirical insights into the development, leadership and implementation of
responsible business strategy." Journal of Business Ethics122, no. 1 (2014): 145-165.
Li, Chunding, Chuantian He, and Chuangwei Lin. "Economic Impacts of the Possible China–
US Trade War." Emerging Markets Finance and Trade 54, no. 7 (2018): 1557-1577.