The United States and China Trade War

trade war

The United States and China are embroiled in an escalating trade war, says Hirsh Mohindra. Since President Trump took office he has complained about the large trade imbalance between China and the United States.  The Trump Administration determined that the trade imbalance was the result of unfair trading practices employed by the Chinese.  As a result, the United States imposed tariffs on Chinese goods in 2017.  The tariffs were set on billions of dollars worth of Chinese goods.  As a result, the Chinese imposed tariffs on US goods entering China.

When the United States imposed the tariffs, they did so on three separate occasions.  The combined tariffs impacted close to $250 billion worth of Chinese goods. China is a large importer to the US, and the tariffs impacted a wide variety of goods – everything from handbags to industrial equipment.

The retaliatory Chinese tariffs were placed on $110 billion worth of US goods, and similarly on a wide variety of products.  Goods, such as medical equipment, chemicals, and even soybeans were impacted.  The tariffs varied in amounts but ranged from 5% to 25%.

China Trade War

The total amount of Chinese goods imported into the United States is close to $540 billion.  Thus, the US tariffs impacted nearly half of all Chinese products entering the US.  The total US goods entering China is close to $120 billion.  Thus, the Chinese tariffs impacted nearly all US products entering China.

In December, both countries appeared to have reached an agreement and pulled the tariffs back, says Hirsh Mohindra.  That’s why it was a surprise when the US announced a new round of tariffs to be imposed on Chinese goods last week.  In response to this news, the Chinese announced their counter tariffs on US goods as well.

By placing tariffs on Chinese goods entering the US, the products are more expensive than US products – and thus encouraging consumers to buy American products.  And similarly in China.  However, many US businesses and businesses around the world are feeling the ramifications of the trade war between China and the United States.

When the world’s two largest economies are embroiled in a trade dispute, there is a lot of collateral damage, says Hirsh MohindraIn fact, the World Trade Organization (WTO) has indicated that a prolonged trade war may lead to global trade crises.  The US stock market and securities exchanges around the world have taken a hit as a result of the trade war.  The positive news is that both sides are actively negotiating to find common ground and hopefully a quick resolution.

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