MGT 400 Case Study: US-China Trade War and Economic Impact

This case study analyzes the impact of the US-China trade war, focusing on its effects on the United States' economy, job prospects, GDP growth, and overall economic sentiment. The study examines four scenarios involving tariffs and retaliatory measures. It highlights the potential for a global economic slowdown and its adverse effects on employment. The solution emphasizes dialogue, discussion, and the active role of the World Trade Organization (WTO) to resolve trade disputes. The study also investigates the role of international institutions, particularly the WTO, in addressing the trade war and its impact on international trade, including the violation of WTO rules by the involved parties. The analysis underscores the need for a rules-based trading system to protect the interests of trading partners and prevent catastrophic situations.

a) Identification of case problem
The main issue in this case study is, how trade war has affected concerned parties like the
United States, mainly, and what will be its impact on domestic job prospects in 1 to 3 years
time duration. How is it going to affect job prospects, GDP growth and overall economic
sentiments in US?
b) Analyze and evaluate issues in the case
Four scenarios were pointed out in this case and detail discussion has taken place in this
write-up about that, these scenarios are classified as:
1. Base Scenario which includes 25 percent tariff and quota in effect in steel and
aluminium on U.S. imports of selected goods from China, plus retaliation,
2. Base Scenario plus, it is U.S. tariffs of 25 percent on motor vehicles and parts
imported from countries excluding countries like Canada, Mexico, the European
Union, Korea, and Japan, plus retaliation,
3. In this case namely Base Scenario plus U.S. has imposed 25 percent tariffs on all
other Chinese imports to US, plus Chinese retaliation, and
4. Finally, it has combined all three together and tries to see and analyse it impacts on
overall US economy and on its work force.
c) Research and comment with structured solutions and apt suggestions to all issues mentioned
in the case study
Current ongoing trade war mainly between United States and China and with some other US
trading partners has the possibility of escalation at larger scale, if not sorted out early, it can
also lead to a major worldwide economic slowdown, which could severely impact the global
employment scenario and other economic growth related issues. In trade war like this,
involved countries mostly never gain it effects their economy and workers adversely. None
of the involved countries are going to gain anything, in fact in reality their economies are
going to hit severely. Also, as per the report published by various media agency, real exports
and decline in GDP is expected due to this trade war. Economy of all other countries also hit
indirectly through sluggish demand for their exports due to weaker global economic growth
or through weak supply chain. These kinds of steps neutralize the net gain and real economic
benefit turn out to be negative or nothing. ("To make better decisions, you need to see the
big picture.”, 2019)
The solution lies only in dialogue and discussion, which has to be take place as earliest
possible under the leadership of the World Trade Organisation with all impacting member
countries’ governments. All countries have to understand that these unending tariff barriers
and some other non-tariff barriers war are not going to benefit any member countries.
Besides, the WTO has to play more active role in this scenario to prevent any catastrophic
situation in coming months or years.

d) Research on the role of international institutions on the given issue and impact on
international trade
The World Trade Organization “(WTO) is a place where member countries go to sort out the
trade problems they face with each other. (Hyatt, P. 2019) WTO has set of rules, contracts and
agreements binding on all its member countries’ governments to keep their trade policies
within agreed limits. The WTO is the only international organization responsible for the rules
pertaining to trade between nations for goods, services, intellectual property, dispute
settlement, and monitoring members’ trade policies.” (“WTO | The WTO in brief”, 2019).
This ongoing trade war among its member countries has severely dented the reputation of the
WTO. Involving parties, that is, the US and the China, have flagrantly violated the WTO’s
rules, hence, the WTO’s credibility is also at stake to intervene immediately and protect the
interest of trading partner, through its rules-based trading system. (“The Trade War Has
Claimed Its First Victim”, 2019). WTO has to see whether, United States national interest
really violated and it can enforce the national interest clause in this ongoing trade war or
member countries would lost confidence in WTO mediating capabilities.
(“China-US trade dispute: what role does the WTO have to play?”, 2019).
Many expert fail to understand United States logic that how steel and aluminium imports that
mostly come from friendly nations endanger U.S. national security. But, some of the WTO
expert is finding logic in it and argued that United States’ Trump administration did not
violate the law. Whereas, several WTO members, which have affected most, have requested
the WTO to setup a dispute panel to review the United States’ new trade barriers.

References:
China-US trade dispute: what role does the WTO have to play?. (2019). Retrieved 17 July 2019, from
https://www.scmp.com/news/china/diplomacy-defence/article/2155640/china-us-trade-
dispute-what-role-can-world-trade
Hyatt, P. (2019). The role of international organizations in international business law - Trade Ready.
Retrieved 17 July 2019, from
http://www.tradeready.ca/2017/topics/researchdevelopment/role-international-
organizations-international-business-law/
The Trade War Has Claimed Its First Victim. (2019). Retrieved 17 July 2019, from
https://foreignpolicy.com/2018/10/19/the-trade-war-has-claimed-its-first-victim/
To make better decisions, you need to see the big picture. (2019). Retrieved 18 July 2019, from
https://ihsmarkit.com/solutions/us-china-trade-war-impacts.html
WTO | The WTO in brief. (2019). Retrieved 18 July 2019,
fromhttps://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr_e.htm