This paper is published in Volume-5, Issue-5, 2019
Area
Finance
Author
Dr. Varsha Agarwal
Co-authors
Ayush Munjal, Tamanna Jain, Kishan Khodbhaya
Org/Univ
Center for Management Studies, Jain (Deemed to be) University, Bangalore, Karnataka, India
Pub. Date
27 September, 2019
Paper ID
V5I5-1189
Publisher
Keywords
Trade war, Export and import, Trade disputes, Developing countries

Citationsacebook

IEEE
Dr. Varsha Agarwal, Ayush Munjal, Tamanna Jain, Kishan Khodbhaya. A study on China-U.S. trade war, International Journal of Advance Research, Ideas and Innovations in Technology, www.IJARIIT.com.

APA
Dr. Varsha Agarwal, Ayush Munjal, Tamanna Jain, Kishan Khodbhaya (2019). A study on China-U.S. trade war. International Journal of Advance Research, Ideas and Innovations in Technology, 5(5) www.IJARIIT.com.

MLA
Dr. Varsha Agarwal, Ayush Munjal, Tamanna Jain, Kishan Khodbhaya. "A study on China-U.S. trade war." International Journal of Advance Research, Ideas and Innovations in Technology 5.5 (2019). www.IJARIIT.com.

Abstract

This paper provides a comprehensive analysis of the on-going China-US trade war, similar to the Thucydides Trap in terms of competing for global economic dominance. It analyzes what the US attempts to achieve through the trade war and why China has been refusing the reciprocal trade relations urged by President Trump. It also identifies social and economic changes in American society, which motivate President Trump to impose punitive tariffs on Chinese goods. It emphasizes that the trade war is asymmetric and China will definitely suffer more losses than the US if the trade war escalates further. At the end of the paper, it suggests that to avoid the devastating result of the Thucydides Trap, China should further open its domestic market to American companies and actively pursue negotiations with the US for resolving the dispute. If trade tensions between the United States and certain trading partners escalate into a full-blown trade war, what should developing countries do? Using a global, general equilibrium model, this paper first simulates the effects of an increase in U.S. tariffs on imports from all regions to about 30 percent (the average non-Most Favored Nation tariff currently applied to imports and retaliation in kind by major trading partners- the European Union, China, Mexico, Canada, and Japan. The paper then considers four possible responses by developing countries to this trade war: (i) join the trade war; (ii) do nothing; (iii) pursue regional trade agreements with all regions outside the United States; and (iv) option (iii) and unilaterally liberalize tariffs on imports from the United States. The results show that joining the trade war is the worst option for developing countries (twice as bad as doing nothing) while forming RTAs with non-U.S. regions and liberalizing tariffs on U.S. imports (“turning the other cheek”) is the best. The reason is that a trade war between the United States and its major trading partners creates opportunities for developing countries to increase their exports to these markets. Liberalizing tariffs increases developing countries’ competitiveness, enabling them to capitalize on these opportunities.