A US – China trade war is possible after Donald Trump announced plans to impose tariffs on Chinese goods. These tariffs were stated to amount to $50 billion, a figure that China has stated will likely lead to a trade war. The reason given by Trump is China’s history of intellectual property theft from the US.
It is pretty certain that China will respond in kind. In fact, China has responded with comments that it is ready to retaliate with whatever measures it deems necessary. A trade war would not be to the benefit of the US at this time, and the US stock markets fell just before the announcement was made on Thursday.
China Highly Likely to Retaliate to US Tariffs
China is unlikely to just sit back and wait. Its commerce ministry has already stated this, and that it was ready to retaliate. A trade war would likely harm the US more than China. Among the potential retaliation would be levies targeted at US exports in agriculture from the states that make up the US Farm Belt.
Donald Trump has strong Republican support from these states but would they be as supportive in the event of a reduced market for their products? The Chinese are likely very aware of how and where they can hurt Donald Trump most.
The Cost of a US – China Trade War
The cost of a US – China trade war would be increased retail prices in US stores. Chinese retaliation would affect US agriculture and the US aerospace industry. This would certainly have a negative effect on the US economy. China was the third highest importer of US goods in 2016.
This is sure to harm American exports, and as a result, US employment figures. Aircraft, pork, corn, and soybeans were the main products purchased by China from the US. These American industries would be highly likely to suffer from a US – China trade war.
US Consumers the Potential Losers
The potential losers in the event of a US – China trade war will be the US consumers. Not only will tariffs increase prices for US consumers, but retaliation by China will also hit the US economy. Already, certain share prices are dropping on Wall Street, although White House officials are downplaying potential issues.
One specific issue is the type of stance taken by Donald Trump. His belligerent approach does little to placate his allies, and only further annoys his protagonists. The US is gradually approaching isolationism with its steel and aluminum tariffs annoying the UK.
Is the US Becoming Isolated in World Trade?
President Trump’s pulling out of the Trans-Pacific Partnership has upset the other 11 nations in this free trade deal. Trump recently applied extra taxes on solar panels and washing machines increasing prices in the shops on these items and annoying China and South Korea into the bargain! He is working on a renegotiation of NAFTA and is generally always complaining about how the US gets the worst deal from its trading partners.
Ultimately, there is going to be a backlash of resentment, although if the US is able to be self-sufficient then it need not worry about the cost of imports. Any backlash, however, will affect US exports. For now, eyes are largely upon the US – China trade war, and its potential repercussions.
