Impacts Of Trade Wars On Global Economies
Economic trade theory highlights that international trade is a massive tool for global economic growth and sustainability.The rebound of global trade in the last two decades was aimed at easing economic tensions between countries.20 years' later, economic rigidity is still at a worrying high.These critical issues have led to the restructuring and amending of international trade theories. The theories are basic concepts of carrying out a trade or the exchange of goods and services. Since countries and entities are trading to benefit, they end up putting restrictions on some of their services and products. This imposition of scratchy policies by some countries and economies in a move to benefit their population hurts the economies on their development sustainment goals.
Military conflicts, as well as supremacy wars between countries, disrupt economic patterns and structures. This leaves a huge blow in the international trading system as individual countries align or position themselves with systems that favour them.In this article, we analyze two main economic wars and conflicts between China and the USA. These wars include the heightened tariff and duties as well. We argue that the policies drafted and imposed by many countries during this time hurt the country's development goals as well as permanent negative disruption of the environment. We assess the impact of trade policies and diversion effects in the United States.
Also read:- What is Jomini's Principles - Principles of war (POW)
The background information on this paper is based on solid information findings from (Zeidan, 2018) and (York, 2019).We begin by assessing the disruption of economic activities by wars and conflicts as a result of established illegal trade due to military and security conflicts. We also explore the subsequent change of policies and trading patterns that result in destructive economic models.
A report by the Federal Reserve Bank of New York researchers in 2019 estimated that the USA lost more than $1.7 trillion in stock prices as a result of trading wars between China. To add more pain to that another report by Bloomberg estimated a loss of more than $316 billion by the year 2020.
After the 2016 elections, the USA experienced a very high level of economic shifts and disruptions. The country restructured policies that sort great trade isolationism claiming to protect local manufacturers and producers. The administration advocated for protectionism resulting in a series of high tariffs and customs from other nations including, Canada china, and Japan.
USA AND CHINA TARIFF WARS
Tariff wars largely arise due to trade deficits.
The decision made by the US government after the general elections of 20016 thereafter triggered a fierce trade war with China. The government pressured China into making major changes in its economic structure. In one instance, The USA demanded that Beijing transfer its technology into the US. The argument by the government was that this would bring jobs to the locals.
The government heavily increased the tariffs which in turn led to a decreased level of imports and exports.The first tariff to be imposed and approved was on importing machines and solar power. The policy approved by the government set new guidelines on the importation of products. For all washing machines imported in a year, the first 1.2 million would pay a duty of 20% and an additional 50% above that. This was in line with the government's assurance and promise of protectionism.
As the economic conflicts escalated there was also a decrease in export quota by both governments as retaliatory measures. The quota was seen as a way of protecting local manufacturers from being flooded by imported d cheap products.
World Trade Organisation (WTO)
In the year 1995 when the World Trade Organisation was born, there were very high hopes of an open, successful and stable global economy. Guided by the two core principles, WTO had a vision of non-discrimination, removal of tariffs and other duty barriers, establish guidelines, and disciplinary issues including intellectual property. The organization's significant decisions are approved by a consensus of certain nations. The developing countries feel excluded. This makes compliance with the notifications and requirements hard. Some of these nations cause many members to call for reforms coursing unrest and disruption of trade flow. As of December 2019, the Appellate body had its operation suspended for more than a year as a result of the USA blocking the appointment. A decision by a single country stopping a global exercise. These issues have led to increased boycotts and trade imbalance.
Impacts of The China- USA tariff wars
According to Trade and Trade, Diversion Effects of United States tariffs show that China made a loss of $35billion in 2019, for tariffed goods. Office equipment suffered a $15billion reduction with other sectors experiencing up to 55% reduction. By the end of 2019, China's Gross Domestic Product dropped by a further 0.2% from 6.2% the preceding year. As the conflicts continue Asian stocks and markets experienced a downward trend. The fourth quarter of Chinas GDP is expected to hit a low of 5.9 % (Nie). The drags and conflicts between these two countries have hit the business environment and trade.
Long term outlooks and the role of World Trade organization (WTO)
Since WTO is the legally mandated body to control global trade, it is their responsibility to commit to the specific rules and guidelines hushed.
Solving Disputes
The WTO has played a critical role in dispute management and conflict resolutions. This is a good strategy in helping avoidance of unilateral decisions. Furthermore, unilateral dispute resolutions have proven to prevent future trade wars.
Doha Development Agenda
The Doha development agented adopted in 2001 in Qatar was arrived at with the aim of liberalizing global agriculture. Many of the lobbying groups who mostly included the world's poorest nations sort to reduce trade barriers and further liberation of agricultural trade, but the negotiations failed in the year 2008. Doha agreement might have stalled but continued 'Plurilatera' talks between WTO members. These talks and negotiations make it easier to negotiate deals as they are narrowed in goals and focus without any member being bound by their terms.
CONCLUSION
International trade wars and conflict has proven to negatively impact the economic flow of a country as well as destructing the business environment. The capitalist state of China has created tension and a business trade environment. The massive loss of jobs and opportunities as the USA imposed high tariffs is a problem that should be addressed unilaterally.
RECOMMENDATION
Following the various impacts of trade wars on global trade, the following recommendations would play a huge role in improving business cooperation and enhancing conducive economic environment.
To begin with, international lawmakers should enact policies that enable strong and open trade by inclusively outlining the terms of engagements clearly.
Finally, supporting the WTO Appellate courts should prevent future conflicts.