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What’s the Worst Case Scenario in the US–China Trade War?
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What’s the Worst Case Scenario in the US–China Trade War?

Ning Nanshan
ZH Island WeChat Wemedia Account , 2018
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In July 2018, US president Donald Trump announced new tariffs on China-made products entering the United States, slapping taxes on another $200 billion worth of goods. While China has also imposed tariffs on imports from the United States, Chinese citizens have become visibly concerned over the effects of the trade war on China’s economy and their livelihoods. In this article from the influential business and economic WeChat wemedia account Zheng He Island, analyst Ning Nanshan offers some reassurance. He looks at possible effects of the trade war on China’s GDP and explains why both nations will likely exercise restraint. He also explores ways in which China may retaliate. getAbstract recommends this insightful article to anyone interested in global trade and the global economy.

Summary

The United States has been threatening China with trade tariffs since the Trump administration took over the White House in January 2017. Concerned about a US–China trade war scenario, economists and analysts from government and private institutions developed financial models early on to predict the potential impact of various tariffs on the economy of both countries. The institutions arrived at similar conclusions: The impact of the trade war on both countries’ economies is unlikely to exceed a 1% drop in GDP. 

Should the United States impose a tax rate of 15%, 30% or 45% on Chinese goods, China’s exports to the United States would fall by 21%, 46% and 72% respectively, according to Chinese securities brokerage firm Industrial Securities; by 21%, 46.5% and 72% according to Morgan Stanley. That means China’s overall export would fall by about 4%, 8% or 13%, respectively. In July 2018, the US imposed 25% tariffs on Chinese goods, totaling $50 billion in trade value. As a result, experts predict, China’s GDP will drop by around 0.2%, taking direct and indirect impact into account. If China retaliates with the same tariffs on equal...

About the Author

Ning Nanshan is a writer for the Zheng He Island WeChat Wemedia Account and covers news on economics and business.

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