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Fighting a Trade War Will Harm the US

Context

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The Argument

The US cannot win the trade war, or any victory will leave the US far worse off than it was before. Even though the US has a trade deficit with China, the imports it is putting sanctions on are not ones over which it has a lot of influence. It only imports a small amount of its steel from China, and this represents a small amount of Chinese exports both to America and globally. This means firstly that it will not have much of an impact on the Chinese economy. Secondly, many of the tariffs hurt American allies to a greater extent, including Canada and South Korea. The tariffs will have a large impact on American jobs. Whilst a few American jobs in steel production will be protected, there are many more jobs in industries which use steel as part of their production which will be harmed by a rise in prices. This means more Americans are likely to be harmed than helped by these tariffs, even before retaliations are put into place. The Tariffs which protect American manufacturing are more politically damaging, as they will raise prices for a large number of Americans. So any government which implements them is more vulnerable at a future election, and is more likely to back down. China also has significant advantages over America. Whilst its GDP is smaller, its current growth is much faster and so can absorb a bigger shock. China also has less need to worry about political ramifications of job losses and price rises due to the strong power of the central government. China is also a huge holder and purchaser of American debt. If China begins to sell or stops buying US treasuries, their value will fall, and America’s ability to raise money to fund itself will be weakened. This means that if America continued to escalate the trade war they would be very vulnerable to retaliation outside of tariffs. In summation even if America has more power to tariff China than it does to reciprocate, there are huge forms of retaliation China can undertake, and such a state of affairs is not sustainable for the US. This means it cannot keep up the war for long enough to cause a change in China’s behaviour. This means firstly that the concession that the US wants from China are unlikely ever to come to pass. This means secondly that continuing in the trade war will have significant effects on the lives of Americans. The loss of large numbers of jobs in significant industries. An increase in prices of consumer goods making life more difficult for American households. An economic slowdown, leading to wider damaging effects across the country.

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This page was last edited on Tuesday, 21 Aug 2018 at 20:39 UTC