The US-China Trade War: Impact on International Business and Trade

This report provides an analysis of the US-China trade war, detailing its origins in ideological differences and disputes over market access and intellectual property. It examines the escalation of tariffs, the shift in manufacturing venues by companies like Enphase and Apple, and the global repercussions of the trade war. The report explores how other countries, such as Vietnam and Mexico, were affected by the trade imbalances and the increased demand for manufacturing in Southeast Asia. It also discusses the uncertainties created for companies and economies due to the volatility of the Trump administration and the impact on business investments, highlighting the complexities and far-reaching consequences of this international trade conflict. The report references several academic sources to support its findings.

INTERNATIONAL BUSINESS
The US-China War

INTERNATIONAL BUSINESS
The US-China trade war took a different turn sometime last year as the Us insisted on significant
changes in the Chinese laws to allow greater access to Chinese markets and protection of
intellectual property. The Chinese government, on the other hand, wanted the US to openly
accept pledges towards some of the issues mentioned above. Ideological differences and
resolving this issue sparkled the US-China trade war (Chen, 2014).
The war escalated to a very great extent last year. Scholars believed that the Us and China were
not being the only parties affected. Companies from both countries struggled to find their way
around the ever-increasing tariffs that these two countries were imposing on each other. It was
evident that as this war continued, there is no doubt that other countries as well will be drawn
into this conflict which has no probability of getting a winner This war took a different turn
when each of these countries started to shift its manufacturing venues to avoid the high imposed
tariffs. For instance, Enphase, a solar energy company based in California had to shift its
manufacturing to Mexico to avoid the high imposed tariffs. Likewise, Apple one of the most
established technology companies announced shifting its assembly point from China to India
(Ferrantino, Liu, Wang, 2012).
This trade war was a sensation in world news. Other countries were worried about the trade war
between China and the Us because globally, these two giants are considered as huge markers for
goods from all over the world. The issue of tariffs implied that businesses and local consumers
from either country will have reduced purchasing power. This is so because of the imposed
tariffs. As such, consumers had to pay more for all sorts of products.
Besides, the increased tariffs highly affected the demand for Chinese products whose
components are manufactured elsewhere other than China itself. This saw the spread of

INTERNATIONAL BUSINESS
economic pain, meant to be experienced by only the parties involved in multiple countries
around the globe. Even though this condition could be dealt with by shifting the production
process out of China, it was not entirely easy to do so. Logistics and shifting production will take
years as it required the construction of new factories and a readily available pool of labor which
was not easy to find.
Moreover, the trade brought about a risk of renewed scrutiny to countries like Vietnam and
Mexico to their trade imbalances with the United States and China. Amid the increased tension
between the US and China, President Trump indicated that Vietnam is the single abuser of
everybody as they take advantage to do the US more than China itself (Liu & Woo, 2018). There
were worries among members of Trump's administration that some Chinese vendors shipped
their products through Vietnam to avoid imposed tariffs. Experts regarded this as a transshipment
which they strongly believed contributed to a very great extent towards trade imbalance between
China and Vietnam thus inflating Vietnam's exports in terms of numbers. The Vietnam
government was alert, tried as much as possible to crack down cases of transshipment as they
feared that it would eventually bring their country into a conflict with the Trump administration.
This was to avoid more tariffs, as earlier the US government had imposed tariffs on the
Vietnamese steel (Lukin, 2019).
Another significant impact of the trade war between the United States and China is the increased
demand for manufacturing by Asian countries, especially those from Southeast Asia. This is so
because even though the region is highly populated, it is barely half the population of China. As
such, no country in the region was up for the task of becoming a full replacement of China (Kim,
2014) The demand was unmatched, and there was a threat of some countries turning potential
clients away as they would not match the demand.

INTERNATIONAL BUSINESS
There is no doubt that the trade war between China and the United States created uncertainties
for not only companies but also other economies around the globe. Also, the tension and
volatility of Trump's administration made things even worse. This is evident when president
Donald Trump practically threatened Mexico with a five percent tariff over immigration policies.
Despite Trump's administration backing down from this stand, there are still concerns among
businesses.
Investment among businesses was also greatly impaired and threatened by the trade war between
the US and China. Companies did not know where to relocate as it was almost impossible to
determine what would be the US next target. Also, with the issue of transshipment under the US
spotlight, there was a general fear which was characterized by slow business investment (Huang,
Lin, Liu, Tang, 2018).

INTERNATIONAL BUSINESS
References
Chen, E. I. H. (2014). US-China trade relations and economic distrust. Chinese Economy, 47(3),
57-69.
Ferrantino, M. J., Liu, X., & Wang, Z. (2012). Evasion behaviors of exporters and importers:
Evidence from the US–China trade data discrepancy. Journal of international
Economics, 86(1), 141-157.
Huang, Y., Lin, C., Liu, S., & Tang, H. (2018). Trade Linkages and Firm Value: Evidence from
the 2018 US-China'Trade War'. Available at SSRN 3227972.
Kim, M. H. (2014). The US–China trade deficit. The International Trade Journal, 28(1), 65-83.
Liu, T., & Woo, W. T. (2018). Understanding the US-China trade war. China Economic
Journal, 11(3), 319-340.
Lukin, A. (2019). The US–China Trade War and China's Strategic Future. Survival, 61(1), 23-50.