Economic Analysis: Trade Wars, Tariffs, and Global Consequences

This essay analyzes the impact of trade wars, particularly focusing on the trade disputes initiated by the United States, specifically the imposition of tariffs on imports. The author argues against the imposition of tariffs, highlighting potential negative consequences such as job losses in industries using materials under tariff, higher consumer prices, and retaliatory tariffs from other countries, which could hurt the US economy. The essay emphasizes that trade wars affect everyone involved, leading to lost output, reduced profits, and job losses for manufacturers, ancillary traders, and service providers. It further discusses the potential for reduced availability of goods, government revenue loss, mass unemployment, and impoverishment. The essay specifically examines the US-China trade relationship, noting that China would likely suffer more due to its larger exports to the US. It also considers the broader global implications, including the potential for disruptions to global supply chains and investment flows. The essay concludes by suggesting that China should engage in negotiations rather than a trade war, as it is the clear underdog in this scenario.

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President Donald Trump knew that imposing tariffs on imports into the United States was
going to result in a trade war which he confidently believed he could win. The main reason given
by the United States to justify trade wars is that the move is aimed at safeguarding national
security. This came after the Commerce Department proposed that the underperforming United
States sector of aluminum and steel posed a threat to national security (Johnson 2018). I do not
agree that the United States should impose the new tariffs because the new tariffs are going to
hurt everyone including the US economy. The new tariffs would result in many American
workers in industries using materials under tariff (steel and Aluminum) losing their jobs
(Handley and Limão 2017, p. 29). American consumers of products made from the materials
under tariff will have to endure higher prices of such products. In addition, other countries would
act in retaliation and impose tariffs on imports from America which would hurt United States
economy.
The trade wars affect everyone. The output is lost by manufacturers from producing
nations as well as profits and jobs (Lovett et al 2015). Turnover is also lost by ancillary traders
and services such as insurers, financiers, shippers, and importers. Reduced availability of goods
in countries receiving the imports means that consumers get subjected to higher prices (Mastel
2016). Reduction in trade volumes means that the government suffers revenue loss. In addition,
reduction in world trade volumes would result in mass unemployment and impoverishment (Park
2015, p. 1971–2013). The parties that would be badly affected by the trade war would the
citizens of the countries engaging in the trade wars. I believe that the trade wars would adversely
affect economies of the two countries as prices would rise forcing consumers to buy products at
exorbitant prices. In addition, citizens of the counties would lose employment and become poor

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(Ossa, 2014). Generally, in terms of the country that would be severely affected by the trade war,
it would be China. Statistics show that a lot of goods from China enter US in comparison to US
exports to China. As at 2016, China exported goods worth 423.4 billion dollars in comparison to
only 104.1 billion dollars’ worth of goods that the US exported to China (Antoine and Laborde
Debucquet 2017). There exists a big gap between the imports from these two countries, meaning
China will suffer most when it comes to trade wars.
Yes, other countries not involved in the trade wars between the United States and China
would get affected by it. The imposition of tariffs by the US on imports from China would
prompt China to do the same on American products. While the US is the favorite to win in this
war, the possibility of the trade wars extending to the next stage may have detrimental effects on
other countries that are not part of the wars. The US, for instance, may go an extra mile of
putting restrictions on Chinese investment into the US. China may retaliate in return and this
may disrupt global supply chains where investments become the target (Noland 2017). This
would lead to companies relocating factories and centers for distribution, affecting global
employment and revenue.
The Chinese government should not engage in a trade war with the US because they are
the clear underdog in this kind of war. The reason being that Chinese import more to the US than
what the US imports into China (Mitchell 2017). In trade wars, countries with diversified
economies tend to win whereas countries with a surplus are supposed to lose (Wildau 2018).
China being the surplus country would lose by a bigger margin although the effect will be felt in
the US also. The best shot China has in this war is to hold negotiations and engage in further
consultations on the way forward.

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References
Antoine, B. and Laborde Debucquet, D., 2017. US trade wars with emerging countries in the
21st century: Make America and Its partners lose again (No. 1669). International Food Policy
Research Institute (IFPRI).
Blackwell, R.D., and Tellis, A.J., 2015. Revising US grand strategy toward China. Council on
Foreign Relations.
Handley, K., & Limão, N. (2017). 13 Trade under TRUMP policies. Economics and Policy in
the Age of Trump, 141.
Heise, S., Pierce, J.R., Schauer, G. and Schott, P.K., 2017. Trade Policy Uncertainty and the
Structure of Supply Chains. Working Paper.
Johnson, K., 2018. Here Comes Trump’s Trade War. FP.
Lovett, W.A., Eckes Jr, A.E. and Brinkman, R.L., 2015. US Trade Policy: History, Theory, and
the WTO: History, Theory, and the WTO. Routledge.
Mastel, G., 2016. Antidumping laws and the US economy. Routledge.
Mitchell, T. and Donnan, S., 2017. China offers concessions to avert a trade war with the US.
Financial Times, 9.
Noland, M., 2017. The Risks and Costs of Trade Wars. US-China Cooperation in a Changing
Global Economy.
Ossa, R., 2014. Trade wars and trade talks with data. American Economic Review, 104(12),
pp.4104-46.
Park, J. (2015). Trade wars & currency conflict: China, Japan, and South Korea's responses to
US protectionism, 1971–2013 (Doctoral dissertation, Boston University).
Wildau, G., 2018. Who will fare worse in a China-US trade war? Financial Times.