The impact of US-China trade war on US economy
Introduction
Economic war between China and United States has started in 2018. United states raised tariffs
on thousands of products, targeting $350 billion of imports from China. China also imposed sanctions
in several waves, targeting $100 billion of US exports. (Pablo Fajgelbaum, Amit Khandelwal, 2021)
Heather Long at the Waschington Post in 2020 described costs of the trade war: “U.S. economic
growth slowed, business investment froze, and companies didn’t hire as many people. Across the nation,
a lot of farmers went bankrupt, and the manufacturing and freight transportation sectors have hit lows
not seen since the last recession. Trump’s actions amounted to one of the largest tax increases in years.”
US economy growth decreased by 0.3 % in 2019. It is equivalent of $65 billion.
American consumers and companies
Tariffs on Chinese products have also hit American consumers and businesses. Commodity
prices for products such as tractors, washing machines, aluminum and steel have risen. Deere & Co. said
their costs for raw materials had risen by $100 million and had to raise prices for their final products.
Caterpillar´s production costs increased by $100 million. In response, the heavy-duty equipment maker
increased prices for its products. Prices of washing machines increased by nearly 12 % and prices of
aluminum and steel by 9 % (Reuters, 2019).
US trade deficit
The US trade deficit with China continued to grow, reaching a record $419.2 billion in 2018.
By 2019, the trade deficit had narrowed to $345 billion, roughly the same level as in 2016, largely due
to reduced trade flows. It should be noted that while the US deficit with China has declined, their overall
trade deficit has not. Trump's unilateral tariffs on China diverted trade flows from China, causing the
US trade deficit with Europe, Mexico, Japan, South Korea and Taiwan to increase as a result (Ryan
Hass, Abraham Denmark, 2020)
Phase one
Promising to improve the situation was the Phase One agreement reached by Donald Trump on
January 15 with the Chinese Vice Premier Liu He. China has pledged to buy more than $200 billion
worth of American goods for the two-year period. The agreement has been criticized by many experts
on the grounds that American producers would sell the goods the same way to other countries. This is
how they are obliged to sell to China (Heather Long, Washington Post, 2020). However, China bought
only 57 % of the goods and services exports it had committed to buy in the agreement. In other words,
China did not buy any of the additional $ 200 billion in US exports that were made under the agreement
(Chad P. Bown, 2022).
Conclusion
President Donald Trump presented the imposition of sanctions on China as a great victory and
described himself and the United States as not giving in to anyone. However, many experts do not
consider the trade war a success, quite the contrarery. Consumers have been forced to pay more for
many products. Costs have risen for companies that have investments in China. And last but not least,
the economic growth of the United States slowed down, which was further exacerbated by the COVID19 pandemic.
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