Tuesday, 8 May 2018

When a "total war" comes



Martin Wolf, the chief economics commentator at the Financial Times,  wrote an article on Financial Times, "Donald Trump declares trade war on China" (https://www.ft.com/content/dd2af6b0-4fc1-11e8-9471-a083af05aea7). He pointed out that no sovereign country would accept such humiliating demands from the US. If his opinion is true and China does not accept the demands from the US and enters a trade war with the US (what I think is likely), then what will face the world economy?

When a trade war starts, both countries will increase their tariffs on each other, and the volume of trades between the two countries will drop dramatically. The US will create more opportunities for countries like Vietnam which also export relatively cheap products to lower the cost-pulled inflation within the US economy. Meanwhile, China will create opportunities for other developed countries who have high technologies, as China needs to seek alternative companies that also provide high-tech products other than American companies. The trade war between these two countries actually create more opportunities for other countries, since both countries have enormous sizes of markets. The US has some political influence on other countries; however, it does not have the power to limit other countries not to export high-tech products to China.

To conclude, when China and the US are fighting a trade war, it opens more opportunities for other countries.

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