Microeconomics Assignment: Analysis of Trade Wars and Effects

This essay examines the multifaceted consequences of trade wars, with a specific focus on the US-China trade conflict. It delves into the economic implications, including the impact on GDP, stock markets, consumer spending, and corporate profits. The analysis highlights the role of tariffs, trade barriers, and protectionism in exacerbating these effects. Furthermore, it explores the political tensions that arise from trade disputes and the influence of government policies. The essay references key academic sources to support its arguments, providing a comprehensive overview of the trade war's impact on both domestic and international economies. The essay also discusses the negative impact on both the US and China and how they tried to resolve the trade war.

Running Head: Economics
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Microeconomics
2/18/2020

Economics
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Contents
Trade war.........................................................................................................................................2
Negative consequences of the trade war..........................................................................................2
Tensions that affects political climate.............................................................................................2
US and China trade war...................................................................................................................2
References........................................................................................................................................4

Economics
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Trade war
There are many countries that conflict due to the trade war and it results in extreme
protectionism. The major reason behind the trade war is the creation of the tariffs and the barriers
in the trade which was done by the other party. The basic reason behind the trade was raising the
import tariffs and putting restrictions on another country’s import.
Negative consequences of the trade war
In regards to the author, there are several negative consequences of the world war such as the
overall economy of the country gets impacted. The economic growth gets slower, the spending
of the consumer gets affected, etc. It not only damages the business but also the consumer of
both the nations (Liu and Woo, 2018). The corporate profits get declined due to the trade war
and their revenues also get impacted.
As per the contrast of the author, the major negative consequences of the trade war are that the
GDP of the country declines. The stock market gets instable and due to the effect of international
trade, global growth gets weaker. The personal income of the person also gets affected due to the
trade war as wage growth get declines. The domestic production has to be increased by the
country so it creates a burden on the domestic producers and it tends to be regressive.
Tensions that affects political climate
The government makes certain policies and takes certain actions to restrict international trade so
due to the trade war; the tension arose in the political climate. It is the side effect of
protectionism as the economy was gets impacted so it was creating the political tensions (Huang,
et al., 2018). Due to the increased tariff rates, the trade tensions have increased and it was
affecting the political climate as they were facing domestic political pressure.
US and China trade war
The two largest national economies are conflicting due to the trade war. The US president Trump
has raised the tariffs and trade barriers on China so that unfair trade practices can be changed.
But this has resulted in extreme protectionism and causes china to move towards the autarky

Economics
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position (Bown, 2019). The tariffs have been imposed by the US as the claim that China has the
theft of US intellectual property. Trump has increased the tariffs so that the US can become
stronger and richer but it has led to the global trade war.
The president of china in 2018 has eliminated the laws that have made on the shipbuilders and
global automakers. They have a complaint about the trade imbalances and have raised the
imports and do the protection more on intellectual property (Waugh, 2019). The US economy
was getting affected by the Trade war as its GDP has been reduced. The turbulence in the stock
market has been seen. The farmers are negatively impacted due to the high rate of tariffs.
As both the nations were facing the negative consequences so they have decided to sign a deal to
erase the trade war. To weighted the global economy and rattled the market that the china can
increase the US imports by $200bn OVER 2017B and the US can maintain 25% of the tariffs on
the Chinese’s well worth $360bn (Li, et al., 2018).

Economics
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References
Bown, C., 2019. US-China Trade War: The Guns of August. Trade and investment policy watch.
Huang, Y., Lin, C., Liu, S. and Tang, H., 2018. Trade Linkages and Firm Value: Evidence from
the 2018 US-China'Trade War'. Available at SSRN 3227972.
Li, C., He, C. and Lin, C., 2018. Economic impacts of the possible China–US trade
war. Emerging Markets Finance and Trade, 54(7), pp.1557-1577.
Liu, T. and Woo, W.T., 2018. Understanding the US-China trade war. China Economic
Journal, 11(3), pp.319-340.
Waugh, M.E., 2019. The Consumption Response to Trade Shocks: Evidence from the US-China
Trade War (No. w26353). National Bureau of Economic Research.