During the trade war between China and the US, the former seeks to promote lower tariffs in international trade. China is currently lowering tariffs on other countries to find new trade partners and enhance relationships with existing ones. This paper provides information on trade barriers and the ways the countries try to avoid them, promoting free trade on the international scene instead. Then it shows the reasoning behind another point of view, which is centered around the merits of protectionism.
Imposing trade barriers have historically been instrumental in providing the domestic economy with much-needed assistance from the government. Moreover, some industries have been created from scratch in developing countries due to the absence of competition. Therefore, in some cases and some approaches, from mercantilism to rapid industrialization, creating ideal conditions that lack competition can be justifiable. Nevertheless, Chandra (2016) observes that once the country develops some industries that can successfully compete in the global market, it seeks to boost its exports. That is precisely what happens in modern China, as the country has already developed multiple industries with the help of joint ventures. The Chinese, at some point, managed to persuade foreign companies to share most of the technologies needed for the production of high-tech goods to be allowed to operate in China. After a few decades of rapid economic growth, the nation has developed its research centers and is now capable of producing most types of equipment, machinery, cars, and electronics.
However, the nation is yet to reach its officially proclaimed goal of becoming an affluent middle-class society. Therefore, the government’s main objective is to encourage aggressive export strategies to ensure high revenues in the long run. China seeks to use any means possible to meet the goal. Despite not being a prosperous society by modern standards, it encourages national banks to actively support infrastructure projects in developing countries, lending them substantial sums to promote the import of Chinese goods and services. According to Cai (2017), currently, China manages to establish beneficial relationships with numerous developing countries as a part of its broader “Belt and Road Initiative”. Therefore, it becomes vivid that this large country that has managed to create all kinds of industries currently enhances the export quality and volume with the help of currency manipulations, low tariffs and efficient export strategies. Moreover, these activities have become more important than providing the population and industries with the opportunity to purchase imported goods.
The ongoing trade war initiated by Donald Trump reflects his strategies aimed at reindustrializing the US and decreasing the trade deficit. He has claimed numerous times that bringing manufacturing jobs back to the US from China is instrumental in ensuring sustainable economic growth and the successful implementation of geopolitical strategies. Nevertheless, it is not yet clear whether the strategy and the straightforward tools it uses are worth it. Trump has been determined in his desire to review numerous trade deals that the US had with other countries. It led to growing discontent with his policies worldwide and promoted new types of cooperation and compromises that bring both American rivals and allies together. The average Chinese tariff on US products has already exceeded 20%. At the same time, the average tariff on competing goods that are imported by the Chinese from other countries has been decreased to around 7% (Bown, Jung, & Zhang, 2019). All these factors pinpoint the controversial nature of protectionist policies.
Numerous politicians in rich countries who have a business background, such as Trump, tend to claim that the reindustrialization process, which is needed to boost the working-class income growth, should also rely on that approach. The US, for instance, has been trying to improve the situation in its manufacturing sector for a long time. Outsourcing and factory closures exacerbate the existing social issues caused by automation and rapidly growing prices. Millions of Americans who do not have a college degree have found themselves without any job offers, which could help them maintain their usual lifestyles. The number of people directly affected by globalization processes, including industrialization, used to grow at an unprecedented pace before 2016. Trump sought to reverse the whole process, but numerous factors, including the extraordinarily high dollar exchange rate, do not allow for structural changes.
Imposing new trade barriers in a county with an extremely high national minimum wage generally harms the population, as it can no longer afford cheap foreign goods. Moreover, in most cases, countries tend to raise duties in response to tariffs. That is what happens with China, which manages to find substitutes even for American agricultural produce by turning to Latin America and Europe instead. Moreover, China can produce most types of electronics, cars, and machinery on its own, which also eliminates the desired impact of high duties. Therefore, this foreign policy tool can hardly lead to a successful outcome in the modern world and should be considered as muscle-flexing in the international arena. Chandra (2016) notes that China has always found a way to lure new trade partners with astonishingly low prices for its goods. Duties imposed by one large economy cannot undermine the nation’s ability to find new distribution channels.
Rich states nowadays cannot truly enjoy room for maneuver when it comes to tariffs and trade wars, as such actions undermine future cooperation. Moreover, it encourages developing countries to further rely on South-South cooperation instead of their dependence on rich nations. Despite the uncertain future globalization faces, rich states should still emphasize the development of lucrative high-tech industries and free trade, as they still determine the future well-being of a nation as a whole.
References
Bown, C. P., Jung, E., & Zhang, E. (2019). Trump has gotten China to lower its tariffs. Just toward everyone else [Blog post]. Web.
Cai, P. (2017). Understanding China’s belt and road initiative. Web.
Chandra, P. (2016). Impact of temporary trade barriers: Evidence from China. China Economic Review, 38(4), 24–48. Web.