Trade War between China and the United States - Microeconomics

Running head: MICROECONOMICS
Microeconomics
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MICROECONOMICS
Trade war between China and the United States
Trade war is a kind of economic conflict which results from extreme protectionism in
which the countries usually creates tariffs or any other kind of trade barriers against each
other in response to the trade barriers imposed by the other country. The United States and
China are engaged in the trade war because each country continues to dispute tariffs paced on
the goods traded between them. The trade war which had been initiated by the United States
will be doing a lot of damage to the global economy. The country which will be imposing
tariff and the country which is subject to tariff would be experiencing losses in the economic
welfare (Robinson & Thierfelder, 2018). Those countries will also be facing any kind of
collateral damage. The losses in the economic output will become permanent since the
distorted price will prevent the globalizations. Both the financial market and the monetary
policy will be influencing the outcome of the trade war. There will be presence of no real
winners in the US initiated trade war (Liu & Woo, 2018). The countries which will be facing
the tariffs will be experiencing decline in the real exports along with the gross domestic
product. The world trade usually suffers more in case of protectionist environment as the
countries turn inward and the multinational companies will be producing to end markets so
that they can stay competitive. The United States will be experiencing the largest decline in
the imports of goods and services. The imports of U.S. will be declining to 4.5% and
similarly China will also experience a drop in real imports which will fall to 3.2% in the year
2020.
The world trade will be suffering more in case of protectionist environment as
countries will be turning inward and the multinational companies will be moving to stay
competitive in the markets. Therefore, it can be said neither the United States nor China will