Global Economic Assignment: Trade Protection of USA Against China and Factors Influencing Cross Border Merger and Acquisition

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GLOBAL ECONOMIC ASSIGNMENT

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Contents
Question 2- the argument for the trade protection of the USA against China...........................3
Question 3- Factors influencing the cross border merger and acquisition.................................5
Reference....................................................................................................................................8

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Question 2- the argument for the trade protection of the USA against China
Globalisation has its foundation on the free trade among different economies of the world.
However, the recent changes in the tariff plans of the government of USA have disrupted the
global trade as it has increased tariff for protecting the economy from EU, Mexico, China,
and Canada. These countries have also reacted with an introduction of higher tariff for the US
products as well. Thus, the global trade platform has suffered a lot (Schuknecht, 2017). The
government of the USA has its justification for the strict trade policies of the country.
One of the biggest reasons for the introduction of the trade barrier is the huge trade deficit of
the USA with the Chinese economy. The trade data of the US economy shows that the export
to the Chinese economy has reduced since the year 2014. On the other hand, imports have
been increasing since the year 2014. The import increased more than that the decrease in the
export of the USA to China. Bonoli (2017) found out that one of the biggest reasons for the
decrease in the export of the USA to China is the export rivalry of EU countries. The USA
mainly exported manufacturing raw materials to China which have now been substituted by
the export from the EU countries. Therefore, the economy of USA got affected by the
changes and suffered in terms of economic performance. Simultaneously, the production and
the cost of the manufacturing sector of the US economy have not been much impressive over
the years. Due to the absence of low skilled labours in the economy of the USA, it has failed
to produce products at a lower cost than most of the other economies of the world. Therefore,
many of the business located in the USA started importing from China to keep their
production cost low (Neumayer, 2017). Consequently, the import increased significantly
while the export reduced leading to a huge trade deficit of the country.
The major argument of the government of the USA for imposing a high tariff for Chinese
imports is that it was affecting the manufacturing sector of the USA. The advocates of the
protectionist strategy of the government have stated that it was the right time to intervene in
the trade of the USA (Dollar, 2017). The government of the USA has been criticised on many
occasions as the trade deficit is not a bad sign for the economy. There are a number of
developed and important economies of the world that have a trade deficit. Therefore, this
strict protection was not necessary for the government and it would hurt the economy of the
USA in the long run. Another major argument of the government of the USA regarding the
imposition of the tariff is that imports from China were harming the domestic counterparts.
Therefore, the government as part of the import substitution policy had to increase the tariff