HI5016: International Trade and Enterprise - Trade War Analysis Report

This report examines the global trade war, primarily focusing on the economic conflict between the United States and China. It explores the origins and meaning of trade wars, detailing how tariffs and protectionist policies have impacted various nations. The analysis includes a case study of the USA-China trade war, outlining its causes, consequences, and the roles of key figures like Donald Trump and Xi Jinping. The report discusses the effects on specific industries, such as soyabean exports, and the broader impacts on the global economy, including instability in stock markets and strained international relations. Furthermore, the report offers suggestions on how to mitigate trade wars, emphasizing the need for agreements to reduce tariffs and promote fair trade practices. The study also considers the effects on European markets, the impact on multinational corporations, and the long-term effects on the global trading system, providing a comprehensive overview of this critical issue.

Running head: INTERNATIONAL TRADE AND ENTERPRISE
International Trade and Enterprise
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Abstract
The following paper will look to discuss on the impact of global trade war on the global
economy. The global trade war was the outcome of financial conflicts two superpower countries
in the world USA and China. The economic policies implemented by Donald Trump had ruined
the growth of economy of smaller countries. The higher tariffs on imported goods created huge
pressures on buying powers of customers. These aspects were most useful to study on the
impacts of this trade conflict from the perspectives of global economy. Some suggestions have
also been given regarding the stopping of this global trade war for the betterment of the
economic crisis that might lead to inflation and loss of jobs.

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Table of Contents
Introduction......................................................................................................................................3
Origin and meaning of trade wars...................................................................................................4
Trade war between China and USA................................................................................................5
Impact of trade wars........................................................................................................................8
Suggestions on stopping of trade war..............................................................................................9
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
Global trade war is a modern phenomenon i.e. designed to get the upper hand in business
contexts. This trade war runs between two or more countries. Mostly the powerful countries are
engaged in this global trade war. The first world countries like United States, United Kingdom,
Russia, China and others are involved in this. They tend to apply the tariffs on imports and
exports from other countries and increase their income through customs. Sometimes this puts an
adverse effect on the economic conditions of smaller countries as they have to purchase the
products at higher rates (Nye and Welch 2014).
The purpose of the following report is to highlight on the different perspectives regarding
the global trade war, its causes and impacts on different countries. The impacts of this global
trade war have been different on various nations. The trade policies are fixed on the economic
conditions of concerned countries. The participating countries sometimes gain the advantage of
applying the economic policies and sometimes they get affected as well. The origins of the trade
war will be very crucial to be discussed in this paper since the beginning of this practice is the
basic component of its effects.
The report will be presented in the form of a case study that is aligned with the current
literature supported by data and evidence. The trade policies of the governments depend
generally on the outlook of the political parties and their leaders. In this case study, some
recommendations will also be discussed on how the trade wars could be avoided. Otherwise, it
would be really distressful for the smaller countries (Nye and Welch 2014). The international
relationship between the countries will be built strongly on the economy and trade relations in
particular. The significance of trade wars in the progress of global economy will also be analyzed
in the paper.

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Origin and meaning of trade wars
As already told earlier, global trade wars have become the most plausible ways of fixing
the trade policies and the ways organizations will behave. Multinational organizations look to
operate in different countries and those countries sometimes seem to engage in the trade wars. In
this context, organizations might face some troubles while conducting their business operations
and exporting their raw materials (Athukorala 2017). Most powerful countries apply the tariffs
because they want to get economic advantage over one another. A nation looks to impose the
quotas or tariffs on other countries and this becomes their major problem for importing goods
from other countries. Most times, alternate countries seem to inflict the same kind of treatment
over the other countries. This action is called trade protectionism. It can cause harm to the
mutual international relationship between two countries and therefore results in the reduction of
global trade perspectives.
According to the critics, trade war has its roots in the attempt of host countries to protect
their domestic industry. These countries also make the attempts to create jobs for their economic
growth and increase in their overall GDP. The application of tariffs is aimed at producing
competitive advantage to the producers of domestic region. USA has faced some problems in
this scenario when they had engaged themselves in the trade war against China. This has affected
their economy from the perspectives of global inflation and recession (Athukorala 2017). This
turbulence in the economic sector has caused harm to the growth of economy and GDP of
smaller countries as well. The import tariffs are crucial for exchange of goods between two
countries (Krugman 2016). If there are political tensions between two countries, they might
engage themselves in increasing tariffs for import so the victim countries must have to purchase

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goods at higher prices. This will create an unhealthy impact on the economy of both the
countries and business industries of both nations.
The government policies of protectionism tend to cease international trade mainly based
on economic and political reasons. The trade war between China and USA has become very
relevant in this scenario. The purpose of nations for engaging in protectionist activities is to
shield their jobs and domestic businesses so they can save their economy and go ahead of their
rival countries (Krugman 2016). Thus foreign competition will not be able to shed any harmful
impacts on local business agencies. Through this method of protectionism, nations can also make
up for all their trade deficits. These trade deficits take place when the overall imports of the
country would look to overtake their exports (Cowen 2014). This gap has to be fulfilled by
implementing some international policies through which other nations will understand about the
focus of concerned nations. According to the critics of economy, trade war will protect all the
interests of nations and provide them advantage of revitalizing their economy and create more
jobs for all native people (Bishop 2018). However, these trade wars have ultimately
multinational companies that operate in both nations engaged in trade war.
Trade war between China and USA
In the words of global economists, trade wars are very controversial between China and
USA in recent times. There are many smaller countries in both North America and Asia that rely
on these two countries for the availability of resources. These two nations contribute a big
portion of successful growth of global economy. When both the countries tend to engage in this
trade war, it is obvious both will face abrupt consequences and loss of their businesses. This will
create jeopardy for their local organizations and customers (Bishop 2018). This economic

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conflict between USA and China is going on in recent period and their leaders Donald Trump
and Xi Jinping are very determined on gaining benefits from their activities. These two nations
presumably are the two biggest economic forces in the world.
From the year 2018, Donald Trump began this trade war by increasing tariffs and other
types of trade barriers on China (Berthou et al. 2019). Their primary aim was to save their
domestic business industry and create more jobs for Native Americans by stopping business
outsourcing to Asian countries. They wanted to force China to change their trade policies
because those were unfair as USA believed. Chinese authorities are also determined for not
changing the practices. Trump always wants to promote the manufacturing of products and
stopping China to dominate their markets. China is also trying to taking away intellectual
properties of USA. According to reports, it has also been said that China is forcing USA to
transfer their technologies to their country. The transfer of Apple workshops to China at Foxconn
to produce Apple devices is a stark example of this matter (Berthou et al. 2019). Trade deficits of
USA have really become a huge problem for all small countries depended on them. One of the
products that have been hampered during this trade war is soyabean. The 15 month long trade
war between US and China had victimized the exports of soyabean to China and huge loss had
been recorded in the global markets. Around 464,000 tons of soyabean had been exported lately.
The USDA data has confirmed this news that China is making its move to import more soyabean
from USA.

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There are certain negative results that have been faced by the native people of USA in
this concern. Most manufacturers and farmers in the country have suffered huge losses because
of this trade war. On the other hand, consumers of USA had to purchase goods at a much higher
rate than normal. One of the major outcomes regarding this is instability in the stock market. The
international relations between USA and China have deteriorated because of the tit-for-tat tariffs
implemented by both countries (Liu and Woo 2018). It is very crucial that trade pacts should be
reached between two countries so the harmful effects on businesses can be stopped. In the very
recent times, it has been seen that China will look for agreements through which they will cut off
tariffs on more than 850 products. Several products like semiconductors, frozen pork and others
are included in this list. If this trade war is not stopped at this moment, USA will face losses
around $400 billion for selling foreign products to China.
China, as per marketers, provides a vast operating procedure in their food market. As a
result of this trade war, thousands of farmers are not getting the positive opportunities for

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working in food industry of China (Lindé and Pescatori 2019). This process has affected their
prosperity as well. As per the records, it has been measured that average amount of tariffs on
Chinese goods has risen up to 19.3%. This is more than six times before the beginning of trade
war in 2018. The perspective of China should be briefed here for better understanding of readers
(Liu and Woo 2018). Chinese government is interpreting this scenario through the idea that USA
is trying their best to stop China from becoming global superpower. This is why they are very
determined not to give USA any chance to destroy their economy (Irwin 2017).
According to reports from Washington, unfair practices in trading and intellectual theft of
property have led to this kind of situation (Kwan 2020). Trump has been trying to force
Americans to buy only American manufactured goods as Chinese goods of all industries have
become very expensive. USA had imposed tariffs around an amount of $360bn on Chinese
goods. Consequently, China also took their revenge by applying tariffs at an amount of $110bn
on American products. All kinds of products imported from China like pork meat to instruments
of music have been settled at 15% duty tariffs (Irwin 2017). All US manufactured goods
imported by China have also been taxed from 5 to 25% tariff rates by Chinese external affairs
and finance ministry.
Impact of trade wars
Trade war has left its effects all over the world. It has left an indelible mark on the overall
well being of common Americans. This trade war will definitely have severe impacts on
European economy. Europe is already very much concerned with Brexit and its impact in their
internal economy (Jean, Martin and Sapir 2018). If this situation does not come to an end,
national leaders of European countries will have to think very seriously about these things. It will

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also create its negative impacts on global trading system as well. In the short-term perspectives,
trade war between US and China will disrupt the entire business transactions between countries.
It can also cause severe impacts in long-term perspectives (Noland 2018). In the post-World War
scenario, European marketplace craves for higher profits in the global arena. Many countries in
Europe import several products from US and China and export their products as well. The rise of
prices of good will become problematic for customers of European countries to purchase their
goods. As global market is vibrant and volatile, this trade war can be the outcome of political
conflicts between two different countries also (Huang et al. 2018).
According to the international economic surveys, it has been shown that both USA and
China are responsible for almost two fifth portion of international GDP growth. With the
continuation of this trade war, import and export facilities between countries will become faded
and normal customers might have to buy their desired goods at a higher price than in normal
times (Jean, Martin and Sapir 2018). Most economic experts have already rung the alarm for
coming economic disasters in future. The inherent conflicts between US and China can also be
caused by political differences by two nations. The Organization for Economic Cooperation and
Development (OECD) had also given the warning to both countries China and USA (Ciuriak
2019). The warning of OECD has to be considered very strictly because all these disputes in
trade have been affecting business growth negatively. Overall GDP of smaller countries is
decreasing as a result of these disputes.
As a severe impact of global trade war, economists have predicted the growth of
economy in 2019 and 2020 around 1.7% only (Lindé and Pescatori 2019). The stock market in
US has been affected because of deteriorating relationships between China and USA. Threats are
coming from both nations and this has halted the growth in Europe as well. In the past, both

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Europe and USA had built their global liberal economic system and catered to the growth of
global economy by establishing industries and innovative campaigns for growth. Many
economically strong countries in Europe took part with US in strengthening global economy
with the international economic organizations like OECD, G-7 AND G-20 (Noland 2018).
Tariffs had been imposed on elements of steel and aluminum. These metals were important for
considerations regarding national security measures. These factors have been challenged
potentially by World Trade Organization (WTO) as well (Moon 2018). There might be some
problems in EU exports to EU regarding automobile products in the future.
Suggestions on stopping of trade war
Most economists have opined that powerful countries like USA and China must make up
some strategies through which they can avoid global trade war (Summers 2016). Otherwise, it
would be dangerous for both countries and others as well. In the recent times, economists have
found out the fact that President of USA Donald Trump has felt very relishing in implementing
this trade war (Hoekman 2019). This kind of protectionism has not done any good for the
benefits of working class that helped him in a big way to get him elected.
Experts have also feared the aspect of Trump withdrawing USA from North American
Free Trade Agreement. This will depend on Canada and Mexico’s strategy implementation as
per the likings of Trump. Common people of America believe this kind of economic strategy will
destroy economic superiority of USA in this manner (Jin 2017). However, it must be kept in
mind that trump alone cannot implement the trade war. Other superior economic countries must
also take part in that process and retaliate against USA in this scenario. Escalation of events will
lead to engagement of other countries in this global trade war. World Trade Organization and

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European Union must come up in this matter and join hands to stop USA from taking these
serious steps.
Various countries should collaborate in creating a global economy that will help all the
way to improve the global business growth (Chen 2015). The trade war can be effectively
avoided if economically powerful countries share their resources and break the internal barriers o
economy. This will create more jobs through outsourcing and act without importing and
exporting goods without corruption. All countries should maintain their honesty in terms of
applying best policies. Trade retaliation must not be encouraged by any country since this will
raise the tensions once again.
The restriction of trade volumes will also be problematic for all the countries in the
future. Though trade protectionism has been effective in some cases like creating jobs in the
country but it will engage powerful countries against each other. This trade war might call in
another depression (Glauber 2018). It is expected that China and European countries might
collaborate against trade tariffs that have been reduced by Trump. These things should be
stopped for benefits of working class across the world. Tariffs should be withdrawn from the
business entities. USA can also take such steps against Canada and Mexico as well (Kwan 2020).
Countries should engage in communicating with all their customers. If the customers find
the entire price rise suddenly, they might get angry on the government. This will become a
problem for US government by various means as well. Prior communication with customers and
telling them about the reasons of this price rise will be helpful to control their rage. In short,
present situation should be communicated to customers in brief (Glauber 2018). The rise of
prices should not come all at once. Rather, it should be gradual and customers should be given

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proper time to adjust with it. It should be noted that customers should not feel the hammer blow
all at once. The American Congress should also begin the process of conducting briefs about all
negotiations with China (Tandon 2015). This will definitely be helpful for them to address the
challenges and control the relentless activities of Trump.
Conclusion
On a concluding note, it must be said that global trade war is one of the most horrendous
events going on regarding world economy. The economic cold war between China and USA has
completely left a negative reflection on the economic growth of smaller countries. The prices of
foreign products have gone high due to application of higher tariffs. In this scenario, countries
should come up to urge both nations to end this trade war because their economies are being
ruined due to this confrontation. On the other hand, this has hampered the international job
market and exporting of necessary goods. Some potential ways must be found to stop this for
revival of the global economy.

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References
Athukorala, P.C., 2017. China’s evolving role in global production networks: Implications for
Trump’s trade war. China’s New Sources of Economic Growth: Human Capital, Innovation and
Technological Change, 2, pp.363-388.
Berthou, A., Jardet, C., Siena, D. and Szczerbowicz, U., 2019. The macroeconomic implications
of a global trade war. VoxEU. org, 8.
Bishop, M.L., 2018. Trade war: what is it good For?. Global Policy Brief.
Chen, Y., 2015. EU-China solar panels trade dispute: Settlement and challenges to the
EU. European Institute for Asian Studies. At http://www. eias.
org/wpcontent/uploads/2016/02/EU-Asia-at-a-glance-EU-China-Solar-Panels-Dispute-Yu-Chen.
pdf, accessed June, 16, p.2016.
Ciuriak, D., 2019. The US-China Trade War: Technological Roots and WTO Responses. Global
Solutions Journal, 4.
Cohn, T.H., 2016. Global political economy: Theory and practice. Routledge.
Cowen, D., 2014. The deadly life of logistics: Mapping violence in global trade. U of Minnesota
Press.
Glauber, J.W., 2018. Likely Effects of a Trade War for US Agriculture? Sad. Institute for the
Advanced Study of Food and Agricultural Policy.
Hoekman, B., 2019. Trade Wars and the World Trade Organization: Causes, Consequences, and
Change. Asian Economic Policy Review.

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Huang, Y., Lin, C., Liu, S. and Tang, H., 2018. Trade Linkages and Firm Value: Evidence from
the 2018 US-China'Trade War'.
Irwin, D.A., 2017. The false promise of protectionism: why Trump's trade policy could
backfire. Foreign Aff., 96, p.45.
Jean, S., Martin, P. and Sapir, A., 2018. International trade under attack: what strategy for
Europe?. Notes du conseil d’analyse économique, (1), pp.1-12.
Jin, K., 2017. China’s Weapons of Trade War. Project Syndicate, 22.
Krugman, P., 2016. And the trade war came. New York Times, 29.
Kwan, C.H., 2020. The China–US Trade War: Deep‐Rooted Causes, Shifting Focus and
Uncertain Prospects. Asian Economic Policy Review.
Lindé, J. and Pescatori, A., 2019. The macroeconomic effects of trade tariffs: Revisiting the
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Liu, T. and Woo, W.T., 2018. Understanding the US-China trade war. China Economic
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& history. Pearson Education.

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Summers, L., 2016. Global trade should be remade from the bottom up. Financial Times.
Tandon, Y., 2015. Trade Is War: The West's war against the world. OR Books.