It was only last year when US President Donald Trump waged a trade war with China by threatening to impose tariffs on $200 billion worth of Chinese goods; adding that any retaliation coming from China would result to him taxing nearly all imports coming from the country.
It is from the perceived ostentatious amount of money that the Chinese government has been spending on future techs –such as computer chips, robotics, and commercial aircraft— that has prompted the Trump administration to take the precautionary measures to keep the Asian country from becoming a world power. By protecting the American market, he believes that this is strategically crucial for the United States.
Following the dissolved US-China trade negotiations, the tariffs were officially raised Friday last week, hitting products that left the shores of China for the US.
China countered by vowing to issue $60 billion worth of tariffs of up to 25% against US goods, stating that they “will never surrender to external pressure” when it comes to their national laws, mainly referring to their government subsidies that economists claim to distort global markets.
To this, Trump responded on a tweet, Monday.
“I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries,” he says on the post. “Too expensive to buy in China. You had a great deal, almost completed, & you backed out!” he added.
He then goes on to order US Trade Representative Robert Lighthizer to impose a tariff to an additional $300 billion worth of Chinese goods.
Following last weeks bout between the two superpowers are reports of dropping stock market indexes, with China slipping at 0.7% and Tokyo at 0.6%. Hong Kong, Taiwan, and Australia saw a drop in their markets as well.
Dow Jones Industrial Average fell 2.4% this Monday, while Nasdaq saw its most significant drop this year at 3.4%.
The trade war has left in its trail a volatile market, which as it seems does not favor many. While Trump is confident that the US is winning its trade war with China, analysts are wary of the adverse long-term effects this may bring to the two countries’ economic relations that can go on even after Trump’s administration. There are concerns that this trade war, in an attempt to one-up the other, is futile. As history tells us, exorbitant tariffs can impede trade, and an impeded deal can mean loss of business and ultimately, earnings.