The war is officially on and the backlash is strong. However, this time the war is “Commercial” in nature and the competing parties are big nations. According to the President of the United States, Donald Trump, it was necessary to hit back and put the proverbial foot down. It was time to bring the jobs back home.
Now, those of us who just think of him as the POTUS forget that first and foremost he is a businessman and that too a shrewd one. Obviously, like his famous reality TV series “The Apprentice”, he cannot tell China “You’re Fired”. So, the next best thing he could do was impose tariffs.
Tariffs On China & The Reason Behind
Accusing the Chinese of stealing intellectual property, Mr. Trump imposed 25% tariffs on almost $50 billion worth of goods from China. Any retaliation from China to these tariffs would increase the scope to $450 billion.
A majority of US imports from China are capital or intermediary products. Consumer goods are a very small portion. Consequently, the intention behind the tariffs is to make the American supply chains less dependent on Chinese merchandise.
According to the president, this is not a trade war. It is a fight against unethical practices that needs to stop once and for all.
Reality Check
Trump wants to safeguard American jobs and at the same time create more. However, it is expected that the price increase in Chinese goods, primarily steel and aluminum, will kill more jobs. Such an impact is yet to make its presence known. As of now, the reserves of materials will be used for production. So, no immediate impact can be felt. But as they diminish, the reality shall strike.
What It Means To The World
It is not just one country that has to bear the ramifications of a trade war between the US and China. Essentially, it is now a question of global supply chains being affected. An escalation of the problem is expected. There seems to be no common ground on which the two countries could meet and reach a suitable compromise. Also, President Trump’s business acumen will not allow him to back off.
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