De Econometrist neemt een statistische kijk op de wereld.
China and the United States have embarked upon a trade war as both superpowers lob threats of trade tariffs, and there seems no turning back. In this article, I’ll be analyzing why tensions between the superpowers are heating up.
Tensions between the United States and China have been heating up for quite some time, as China is becoming a consumer market, and no longer just a cheap place to manufacture goods. These changes, of course, affect the United States, which relies heavily on this manufacturing. Trump has been sceptical of previous policies concerning trade with China since his campaign and started to follow up on his promises to make stronger policies right after he got inaugurated. This was needed to motivate the job market of low skilled jobs, which has been tough for years due to outsourcing to cheaper less developed countries. President Trump used the argumentation that China has been delaying stronger intellectual property laws for years to motivate domestic growth. Companies in China have a massive advantage due to the non-existence of these strong laws: other foreign companies spend resources on research and development, to have their findings be copied.
The Chinese ministry of Commerce quickly responded with their own tariffs on aluminium, airplanes, and cars among other things. These tariffs were drafted to motivate domestic development of qualitative goods, mainly to combat the dependence on the United States, and thus also to combat the United States’s previously enforced tariffs.
After a back and forth over the last year of different tariffs, related to the ones mentioned above, there seems to be no end in sight. Though it seemed a popular decision during Trump’s campaign to enforce tariffs, sceptics have criticized Trump because he could have expected this trade war to happen. This creates a lose-lose situation for both sides. The only side profiting from all of this drama seems to be the countries that are not involved, since China and the United states now have excess production of cheap goods, and qualitative goods respectively. Of course, it could be argued that the dependency on another country for certain goods gives the other country power, and hence requires trust, which is far to be found in the situation between China and the United States.
The recent HUAWEI ban (To read more about the HUAWEI, you can read Sam Ansari’s article from last week), seems to be another measure of Trump to stagnate the growth of the Chinese economy. Because all US companies are now banned from trading with HUAWEI, Companies from the United States will also suffer. Personally, I think that HUAWEI is so differentiated over several industries, that it will not suffer long term, and this policy will motivate Chinese companies to make certain parts that are currently manufactured in the United States. The United States its position of power will thus be affected.
The worries of American working class citizens are justifiable because many jobs are being outsourced with stagnation of wealth in these communities as an effect. Meanwhile, China’s working class is flourishing because of these changes. On the surface, Trump’s plan seems to counteract this change, but not all is as it seems. Even though the United States has a great position of power, China seems to have the upper hand in this conflict. This can be explained by the fact that they possess different markets like Europe and Asia, while the United States fully relies on China for the production of many cheap utilities. China is also scheduled to overtake the United States its position as number one economy.
All in all, Trump seems to long for a structural change in cooperation with China, due to China misusing its position of power. This longing is justified due to the difference in prosperity growth. The long term prospect doesn’t seem to be in favor of the United States because of it losing its position as number one economy. I doubt that these reforms will change anything about the developments, but rather that it will slightly prolong the United States its position of power.
Dit artikel is geschreven door Max Kloosterman