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A US - China Trade War on the Global Economy - Alldamoney

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A US - China Trade War on the Global Economy

The reason why the overall pace of global economic growth remains relatively weak is that globalization in recent times is on a backlash, from American voters who've lost their jobs to British voters who voted in June to reclaim their independence from the European Union.



The engine of global trade is slowing after decades of liberalized trade deals and lower tariffs helped boost export and import traffic worldwide.
Trump can’t wait till he gets into the White House to demonstrate what his administration's trade policy might look like one of the things that propelled him to  victory is anti-free-trade sentiment among the electorate.
He recently convinced air-conditioner manufacturer Carrier to decrease announced job cuts in the company as part of its move to shift manufacturing to Mexico, in what anaysts say is a show of how he will get the work done.

Trump's earlier pronouncements on global trade include repealing or overhauling trade deals entered by US Previous Administrations.
"We will either renegotiate it or we will break it," Trump said last fall, every agreement has an end. Every agreement has to be fair."
For example, some of Trump's signature campaign pledges include repealing or overhauling the 1994 North American Free Trade Agreement with Canada and Mexico, the two top U.S. Trade partners. He also vowed to raise tariffs on Mexico and China.  Trump’s plans could result in a trade war between the US and its trading partners most notably china.
             

Here are some insights of What a US-China trade war would look like

Is it really as bad as it looks?

Even if china is said to be responsible for US trade deficit. It is nowhere near the 49.6 percent reported by economic data. Almost 37 percent of China’s exports to the US in 2015 alone consist of value-added import from other countries who happen to be top partners of the US (Japan, Germany and Korea). If we redistribute the import value-added to their original source countries, it would give a different picture, just only about 16.4 percent.
So, therefore a trade war with China means a trade war with its traditional trading partners of Japan, Germany and Korea.

What would be the overall impact of a US-China trade war on other countries?
A US-China trade war two of the world’s biggest economies would in one way or the other impact on the global economic condition both positively and negatively.
Let’s say China’s total exports to the US decline by 10 percent as a result of a trade war and other countries gain on the Chinese loss concurrently. The loss would spill over to their current market shares; and cause damage to already existing supply-chain linkage between industries in those countries that do business with China. For example Korea, Taiwan, Japan and Malaysia and other countries who are in the supply chain would definitely lose their market share.


On the Chinese currency


If the US imposes trade restrictions on China as its president elect Donald threatened and called a currency manipulator, the probability of free floating the RMB in 2017 could be as low as 30%. A free-floating regime is unlikely to cause the RMB to fall more than 20% from current levels; Given China has a reasonably strong external position (current account and net international investment position)

China’s response
If the Trump administration launches a trade war against China, Beijing has many options for a possible retaliation. For example, China can decide to replace its Boeing jets with Airbus and US soybeans with those from South America. A trade war will also threaten the progress made in the US-China Bilateral Investment Treaty, currently under negotiation. type/left

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