The Escalation of the Trade War between the United States and China
The United States of America is fuelling a trade war with its main competitor China whose economy has expanded to the detriment of America`s traditional privilege in the international economy. The blusters from President Donald Trump as a result of China achieving a trade surplus from the American market has acted as a catalyst for the current trade hostilities. The trade war has been elevated into the international political stage. It is because the American opponent, in this case, is big in terms of the economic size, the global ambitions of being hegemony and further, having a perfect match with regard to industry capabilities. This essay will focus on the factors that have escalated the possible trade war between China and the USA.
The Clash of Economic Policies
President Trump supports an America first policy while the Chinese President Xi Jinping is pursuing the China dream by spreading its tentacles through the country`s financial power into the African continent and other third world countries by extending favorable loans for development(Ross,2016). Consequently, the world trading architecture will be jeopardized if the USA under the current administration maintains the protectionist policy that will escalate the trade war with the US allies being major losers.
Game Theory Analysis
The game theory can help to explain the options that are available for the USA government and China to neuter the current trade hostilities because each camp has weaknesses that will expose them to economic shocks. Using the decision tree tool for analysis that is employed in game theory, China will get more payoffs if there is a positive response to the demand by the US to have the Yuan appreciated. China will realize an optimal decision by resisting the pressures from the US, based on its inherent strength emanating from the country`s trade surplus (Zeng, 2004). The US must tread carefully while engaging in trade hostilities with the country because of its dominance in the export business and exerting pressures on this economic giant will spill over to other parts of the world. Imposition of tariffs on Chinese imports will escalate the trade war hence this is not a viable option for the US. This is mainly because China could possibly retaliate through harassment of American companies operating in China and introducing taxes for agricultural imports from the US.
The Impact of China's Growing Influence
The explanation for the increased risk of a trade war between China and the USA can be related to the country`s laws which have not helped to contain the growing influence of China as an economic powerhouse. Acting on American interests through the imposition of trade barriers will ignite a trade war which in effect will give China the leeway to punish the USA by closing its market, with eventual grave impacts on the global economy (Nye, 2016). The Chinese position with regard to appreciation of its currency, Yuan, is that it will affect the economy negatively because that would happen with other Asian countries maintaining a status quo.
The Importance of Cooperation
Conclusively, igniting a trade war between countries has the ability to exert pressure because of their economic capabilities can be detrimental to the international economy. Notably, China and the US are employing their strong weapons in the trade. It is mainly to fuel for a trade war that is emanating from the public perception in America that they are engaging in an unfair trade practice where the country is losing (Allison, 2017). Consequently, the US government has realized the importance of cooperation in expanding the market for their exports instead of employing punitive measures that are inappropriate and likely to start a trade battle.
References
Allison, Graham T. Destined for War: Can America and China Escape Thucydides's Trap?,
2017. Print.
Nye Jr, J. S. (2016). Bound to lead: The changing nature of American power. Basic Books.
Ross, R. J. After the Cold War: Domestic Factors and US-China Relations. Routledge, 2016.
Zeng, Ka. Trade Threats, Trade Wars: Bargaining, Retaliation, and American Coercive
Diplomacy. Ann Arbor: University of Michigan Press, 2004. Internet resource.
