Question

Trump’s imposition of $200 billion tariff in the Fall of 2018 (taxes on imports to the US Market) on Chinese exports to the US has caused a global tension in financial markets and related business activities. In retaliation of Trump’s tariff, China also imposed almost similar amount of tariff on US exports to China. But in response to this trade war between the US and China, the stock price indices of the Wall Street in NYC did not respond negatively until late December 2018. Actually, given the robust economic growth and very low unemployment rate, the stock prices continued to surge with a very little volatility in recent weeks. Given this circumstance of the market, briefly explain in a few sentences who would bear the most burden of this trade war (Chinese exporters or consumers or both; vs American consumers and producers or both? Or a wash?). 2 pts

Answer 1

It is the Chinese exporters who will suffer the most, because China is export oriented country and relies strongly upon the export despite having the largest consumer market. China will find it difficult to compensate the loss from neighboring nations, as these nations are also willing to export much more than what they are doing and build ties with the USA to make reciprocal trade. The next sufferer will be the US consumers who were getting cheap products. Now, they have to buy the products either from the domestic producers or new import that will be at a higher price than the Chinese imports. US exporters will not suffer as they can find new territory in lieu of imports coming to the USA from the same nation.