The Trade War between China and the USA

Tariff means that a country imposes taxes on imports with another country. This is done to motivate people to buy goods manufactured in one’s own country rather than buying imported goods at higher prices. This, in turn, has an effect of creating more jobs within the country and it boosts the national economy. And this is how a country can try to decrease the trade deficit with another country. Many western companies settle their factories in China because of the low labor cost because of the low standard of living of the Chinese population. Producing the goods at lower prices and then exporting these goods to countries like the USA has been the primary factor in Chinese economic growth. As a result, the US stands at a $375 billion trade deficit with China as of 2017 (The US imports from China: $506 billion; The US exports to China: $130 billion). In his campaigns, Trump promised to lower the trade deficit with China. This tariff is the byproduct of that promise only. 

Also, the USA has been very clear and communicative about the unfair policies China has been using to increase its market. (1. China has been promoting the unfair transfer of technology from America by imposing US companies to disclose their technology and intellectual property if they want to do business in China. 2. China has been a currency manipulator for a very long time (more on this later).) This tariff move has come as a sort of punishment from the Trump government. The USA has placed similar policies on Mexico, Canada, and the Europian Union nations by taxing the imported steel and aluminum (among many others) from these nations. As a result, the car industry has suffered and reported a lower profit for the year 2018 (Ford and General Motors). These nations have retaliated by imposing tariffs on the goods imported by America. China cannot do this because it sells much more to the USA than it buys from them but the people who are following this trade war closely have said that China will not bow down in front of Trump. 

This trade barrier does not only impact these two nations’ economies but other nations too. Asian countries are interlinked with each other’s trade profits or losses through supply chains. For example, Singapore serves as the largest transition hub for China. Many shipments destined for China make their way through this tiny nation’s port and that is exactly how Singapore has benefitted from this globalization and trade revolution. Many products that are assembled in China draw their subparts from other Asian countries like Malaysia and Indonesia. The elevated costs of Chinese goods will, in turn, affect the prices in Singapore and many south Asian countries. This is pointed out clearly by Singapore’s minister of trade, Chan Chun Sing, that “to produce a product, chances are it would be a global production chain, and if one part of the global production chain gets disrupted or distorted, it hurts not just one specific country, but all countries”. 

The International Monitory Fund (IMF) has issued a report saying that this trade war has and will affect the world economic growth and predicted 3.7 percent growth as opposed to the earlier prediction of 3.9 percent. Actually, this trade war is just not a war for fairer trades, it is a war to become or remain the global influence/leader over the world. What can America do to improve the situation: instead of aiming for power all over the world, it can try to become a team player and a statesman. After all, you can do good only when your neighbors are doing well too.

The Balance between Economic Growth and the Environment

The Nobel Prize in 2018 has been awarded to two American economists: William Nordhaus (77) and Paul Romer (62). They have been chosen for this honor because of their very novel contribution to the research connecting economic growth and the environment. They have come up with a complex model depicting the effect of environmental perturbance on economic growth. We already were aware that the harm we do to our nature affects our health, our resources, the ecological balance, etc. But never did we know the exact monitory loss caused to us for every ton of our carbon footprint. The model tells us the exact dollar loss for every ton of carbon-di-oxide produced by us. This model gives us a way to predict that if we spend even one less dollar in developing the technologies to curb the amount of C02 than the dollars equivalent to the amount of C02 being produced, we will be successfully saving our future for a long time without hampering our economic growth. 

Coincidentally, this award was announced at the time when the UN claimed that within 12 years from now, the environment's temperature could increase by 1.5 times if we keep polluting our environment at the same pace. Basically, this is a global alarm to all the countries to start developing less harmful technologies and to start enforcing the governance and some policies to tax the producers of the harmful technologies which cause an enormous amount of carbon footprint. No discrete solution to impose strictness on nations with higher footprints has been given by the two winners. The theory of taxing (proportional to the amount of C02 produced) proposed by Nordhaus does not seem to be a practical solution. This is because the money will indirectly be charged from the consumers of the benefits of the technology (the developing nations) rather than the producers (developed nations) of the technology which is actually causing the pollution.

The research also aims to bring forward ways to stop the effects of environmental change. The solution is in our knowledge. Innovation is our tool. Also, we need good governance policies and lifestyle changes. They say that such technology or innovations have to be developed which cause less harm. Now, there is an interplay between innovation, economy, and the climate. Every nation has two kinds of investment policies: long-term and short-term. When a nation wants to invest in researching the new technologies to improve the environmental conditions, it is a long-term investment and obviously, it affects the short-term investments of developing nations because their primary focus is to feed and clothe their population. In such cases, it is the responsibility of the developed nations to invest in the long-term finances for developing high-class technologies, either by themselves innovating or funding the research in countries like us. After all, those nations are and have been the primary cause of this level of environmental degradation in the first place. But, some countries like the USA do not want to participate in global coalitions at all (thanks to Trump’s policies) and some pseudo developing countries like South Korea and Saudi Arabia hide behind their “developing” tag so as to restrain from contributing. In this case, we have to find a sweet spot such that the economic growth and the environment can go hand in hand without us having to beg in front of developed nations.