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US-China trade war

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A trade war refers to an antagonistic relationship between the two nations engaged in bilateral trade. A trade war between nations involved in bilateral trade is characterized by both countries using their international trade policies to impose unfavorable trade terms on the businesses of each side engaged in business relationships, interactions, and transactions. Some of the trade policies used as weapons in trade war include legal regulations in the area, tariffs, trade policies, and foreign exchange rates, to mention a few. Trade wars have adverse impacts on the pre-existing nature of the relationship between the two nations engaged in a trade war. For instance, the unfavorable trade terms imposed on both sides of the countries involved in a trade war result in high financial costs on each side. This especially the case where the warring nations have economies, which t are interdependent. The US and China are two global economic powerhouses that are presently engaged in a trade war that was initiated in the year 2018 by the US government. The sections that follow analyze and discuss the ongoing US-China trade war from multiple stakeholder perspectives. Subsequently, the articles will conduct an in-depth evaluation of the critical aspects of the US-China trade war and provide recommendations for the possible solution approaches that can be employed to resolve the conflict and restore the trade relationship between the two nations.

Body (1,850)

3 Key Points on the Primary Issue from Multiple Stakeholder Perspectives (550)

 

The International Trade Policy and Perspectives into the Problem

As an established capitalist state, the US was a huge proponent of free trade policies in international trade policies. Free trade policies were developed around the idea that there should be minimal interference by governments in the interaction of various economic systems in the global market. Contrarily, the trade outcomes attained in trade relationships between various nations should be determined by the market forces in the global economy. Therefore, the conflict that led to a trade war between the two nations was caused by the fact that the US accused China of employing protectionist measures in its international trade policy (Erken. et al., 2018). Consequently, the interference of the Chinese government in the bilateral trade between the two nations gave is traders an unfair advantage in their economic interaction. In turn, The US changed some of its trade policies that facilitated favorable trade terms for massive sales of Chinese exports in the US market to level the playing field and eliminate the impacts the unfair advantage enjoyed by Chinese businesses exporting commodities into the US.

On the other hand, China’s economic journey began with the employment of communism as the nation’s economic system. Unlike the US, China’s current economic model involved the coordination of its communist political system and its economy to foster the nation’s economy. The approach was first used to facilitate China’s economy to a level of self-sufficiency and then to a level where it became an economic superpower and also the leading exporter on the global scale (Carvalho.et al., 2019; Riad. et al., 2020; Schneider-Petsinger. et al., 2019). Therefore, the efficient economic approach employed by the Chinese government should not be perceived as a tactic specifically designed to harm the US economy and facilitate a higher level of merits relative to its trade partner. Subsequently, by coordinating by its economy to foster the economic performance of China, its government is not committing any atrocities against the US since, as a sovereign nation, it has the freedom to manage its economic affairs using the approach that best suits it.

The Trade Deficit/Surplus in the US-China Bilateral Trade

In the year 2018, the US had one of the highest trade deficits in the entire globe, an outcome that has been facilitated by a combination of multiple macroeconomic factors. Moreover, during 2018 about 48% of its global trade deficits can be traced back to its bilateral trade with China that was estimated to be USD 419 billion. As a result, the instigation of the trade war by the US President Donald Trump also intended to offset the deficits in the balance of trade to achieve favorable terms for the US by eliminating some of the economic merits of Chinese exports.

On China’s side, the high export rate of Chinese goods to the US that overshadows the US exports to China in their bilateral trade relationship is a testament to the efficiency of its economic system and trade policies rather than an act of aggression against the US. Also, China’s government is not hesitant to point out that in 2018 the US had generated an approximate of USD 40 billion from trade services that it had conducted through its bilateral trade with China. Subsequently, the bilateral trade between China and the US is beneficial to both nations. Thus, the fact that the prevailing macroeconomic factors in the two nations favored China more than the US is not attributed that should be punished.

The Race for World Dominance

One of the most influential factors in the economic, political, and social advancement of US populations and the nation as a whole can be attributed to the scientific and technological advancements. This can be depicted in many national aspects of the US, such as its military power and the products of its various economic sectors. Subsequently, the US is keen to protect the intellectual rights of the inventions and innovations developed by the nation (Schneider-Petsinger. et al., 2019). However, the massive industrialization of China has utilized technologies that were developed in the US without adhering to the global intellectual property regulations.

In China’s defense on the issue, Chinese corporations usually attain the use of intellectual property developed in the US through trade agreements and partnerships between business institutions from both nations. Consequently, the transfer of American intellectual property to China as a result of the self-interest of American corporations that seek to utilize the manufacturing capability of China’s economy because of the simultaneous business merits presented by the approach ((Larry. et al., 2019; Schneider-Petsinger. et al., 2019). Therefore, the transfer of intellectual rights between the two nations is not an underhand strategy on China’s side aimed at exploiting the US but rather an outcome of the interaction of macroeconomic factors of the economies of the two nations.

An In-depth Discussion of Three Alternate Stakeholder Interpretations of Key Issue

The International Trade Policy

While China’s active involvement in the regulation of the nation’s economy through its government to foster its economic performance is not a new concept to nations all over the globe but rather one that has been ongoing for an extended period (Schneider-Petsinger. et al., 2019). However, the recent disapproval of China’s economic mechanics that led to the trade way featured many accusations challenging the ethics and legitimacy of China’s international trade approach. The first accusation brought forward is that China engaged in currency manipulation by intentionally devaluing its currency to make its exports cheaper relative to the same products manufactured in the US.

On China’s side, the direct intervention of the government in setting its currency’s value at the levels that favor it in its international trade venture is a strategy that is in the rearview mirror of the nation. Moreover, the nation’s direct interference with foreign exchange rates through the People’s Bank of China is a currency depreciation strategy that has not been conducted during the recent periods that led to the economic conditions have been used as a justification for instigating the trade war on the US (Schneider-Petsinger. et al., 2019). Contrarily, China attributes the high value of the dollar to its currency to the strict fiscal policies developed and implemented by the Trump administration. Therefore, the US is not justified in punishing China for a past strategy that is no longer in use and not directly responsible for the unfavorable terms of trade that its economy has achieved.

The Trade Deficit/Surplus in the Bilateral Trade between the US and China

The deficit in the balance of trade between the US and China has been attributed to the low cost of Chinese products relative to those produced by counterpart industries in the US. Moreover, cheap Chinese exports have not only impacted the US market, but rather, they have flooded the global market. As a result, the cheap export threatens the loss of the US market niche to China’s industries, thus, threatening the continuity and sustainability of US firms competing in the same sectors. Besides, the cheap China exports that have flooded the global market also threaten the loss of the competitiveness of US products in the global market (Amiti. et al., 2019; De Nicola. et al., 2019; Meltzer & Shenai, 2019). A good example of China’s exports valued at USD 2.8 billion that have been subjected to a blanket tariff on these grounds includes its steel and aluminum products that are significantly cheaper than those of the US.

China’s Perspective on its Trade Surplus with the US

China’s response to the blanket tariff imposed on its aluminum and steel exports to the US was imposing a tariff on US exports into China that affected US products worth 2.4 billion (De Nicola. et al., 2019; Meltzer & Shenai, 2019). Subsequently, the low cost of manufacturing in China relative to that in the US has incentivized US organizations to outsource their production activities to China to benefit from the cost economies. In turn, many of the US firms that design their goods for the US market typically prefer to have them produced in China, a measure that leads to a flow of investment capital out of the country.

The Race for World Dominance

The interest of the transfer of US intellectual rights to China has elicited the government’s interest in the issue because of several reasons. The first one is that China’s economic policies prohibit the establishment of manufacturing plants by organizations from foreign nations if they do not partner with local partners (Kapustina. et al., 2020). Subsequently, the obligation of the US to share their intellectual rights with Chinese firms is perceived as systematically instigated form exploitation. In addition, some of the technological advancements attained by China from other nations, where it ignores global copyright laws, has both civilian and military applications (Mildner & Schmuker, 2019; Huang. et al., 2019; Prime, 2019). Therefore, the attainment of US intellectual property that has military applications by China threatens the military power of China.

From China’s point of view, the nation’s foreign trade policy is nationalistic to ensure that foreign firms do not utilize its operational advantages without benefiting the nation’s citizens who are a vital facilitator of any financial merits that these firms may attain. Moreover, China is not to blame if the US’s economic policy approach has significantly raised the cost of production activities within the country to a level where its capitalists prefer to invest their resources in foreign nations like China.

The solution to Key Issue

The first solution that can be used to resolve the ongoing trade war between the US and China will be finding a middle ground where both nations compromise to attain a settlement that will facilitate a state of Pareto optimality (Schneider-Petsinger. et al., 2019). Subsequently, a considerate compromise will be one where the utility of both of the nations is maximized to a point where further increases in utility interfere with the core interests of the other.

Implementation

The middle ground between the US and China that will facilitate a cease-fire in the trade war should begin with the opening and renegotiation of the current trade treaty between the two nations.

The second step in the resolution process should focus on the issues of each side of the divide rather than positions held by the two governments that are absolute and protectionist. This can be the objective presentation of primary and secondary goals of each side. After that, the two sides should then shift their focus to formulating resolution approaches that will address the needs of each side to the maximum.

The third step is that accountability for the undesired outcomes of the bilateral between the two sides should only be considered offensive, where there is proof that the opposite side perpetrated them intentionally to harm the other side. Based on this principle, unintended outcomes achieved from economic measures carried out in good faith should not be cause for punishment but rather a starting point for resolution. This step is vital in ensuring that the two nations do not lose the merits they are attaining from trading with each other because of the development of new concerns and issues.

Finally, each side should be given a chance to develop an adjustment to their international trade policies that resulted in undesired outcomes on the other side as a show of good faith and commitment to the progress of a productive trade interaction. For instance, if the transfer of US intellectual rights to Chinese firms was solely meant to enhance the economic merits of collaboration between firms from both nations, then China should come up with a way of reassuring the US that they will not be used for military purposes.

Conclusion and Recommendation

The above sections have played a vital role in discussing the US-China Trade way. The parts have identified and addressed three key issues associated with the trade war. These were the international trade policy approach, the deficit/surplus in the balance of trade, and the race for global dominance. Moreover, the article has also formulated a possible resolution for the problem and the implementation strategy. The multiple stakeholders approach employed in the analysis and discussion of the points associated with the problem was paramount in evaluating and enhancing the comprehension of the issue from both sides of the divide. However, since the ongoing trade had adversely impacted both sides, the resolution of the problem can be achieved by finding a middle ground between the two interdependent nations.

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