What will happen if the world two biggest economies direct war against each other? If seen, the war between America and China in the right way has not started, but a trade war with China started and no one can tell how bad it can be.
Know how the collapse of the economies of these two countries will affect India.
The United States has decided to impose a huge tariff on goods coming from China and China has also decided to respond in his own style.
Eye for an eye
In the USA, there is an additional charge on products imported from China. On Friday, these items will be charged for 25% i.e. for those American consumers, those things will become 25% expensive.
- It includes a semiconductor chip made in China. These chips are found in televisions, computers, smartphones, cars and chairs used in everyday life.
- Along with this, the US has imposed extra charges on plastics, nuclear reactors and dairy equipment makers.
- According to the Peterson Institute of International, the items which the US has imposed an additional duty on are those things which are used in the production of other things, and because of this, it can affect the production and market of other goods.
The United States actually wants to impose additional charges on the things that are being produced according to China’s 2025 policy. They are fully prepared in a trade war with China.
In exchange for this move of the United States, China has also charged US products.
- Of the 545 US products that China has raised the fees, 91% of the products are from the farming. By doing so, China has attacked directly the farmers and people associated with agriculture. It is believed that this is an important part of the American President’s vote bank.
- China has also increased the fees in the car sector, i.e., now the Fiat, Tesla, Chrysler, set up in the US, will become expensive in China.
- Along with this, there is an increase in (slightly) fees on medical products, coal and crude oil.
A trade war with China
China has expertise in playing with words to say its word firmly, but the situation in the ground is different from it.
Says Vineet Motwani of Silk Road Research: “Our experts present in China, belonging to the business community, say that the conditions are very serious and they are getting worse, it seems that the situation is going to be worse now if the U.S. continues a trade war with China.”
Vineesh has just returned from China tour. He discusses the opportunities for doing business in China in connection with his research, with the companies present there.
He says that these worries may be transformed into precarious times as well as in ‘taking more precautions and decreasing trust’ for traders.
This would mean that companies will start retreating from their work and if the Chinese withdraw from expanding their business, then it will have an impact on other countries in Asia.
So what production should be done in other countries?
The point is that when the Trade war with China and the United States, the most impact will be on both of these.
DB Chief Economist Timur Beg said that due to this trade war, both countries could lose 0.25% of their GDP this year. The case may worsen next year and the growth rate of the two countries can be reduced to 0.5 %.
Beg said, “China’s growth is 6-7 %, and 2-3 % of the US, so America gets more loss than China.”
The effect of the impact on the supply chain can also be on South Korea, Singapore and Taiwan.
China exports large amounts of equipment that other countries use to produce new products. Nick Murro of the Economic Intelligence Unit says, “If there is a slight difference in exports to China, then it will have far-reaching consequences for other countries.”
One way to take advantage of exporting the United States (or to avoid harm) can be that the companies should remove the production of equipment from China’s land and take it to another country. But it will take time to complete this change and then it will take more time to complete the goal that China produces.
And the result will be that the Americans will have to pay more for small things at present.
China’s strong response to the US
American companies working in China may have to face the “Chinese reaction”.
For example, owners of the Tesla car company have already said that the Chinese market is extremely important to them and they have expressed concern about it.
The company takes the goods of its own from the USA and its cars sold in China will be charged 25% and this additional charge will be above the 15% fee charged on imported cars in China.
Consequently, the prices of Tesla will go up significantly in China and these cars may be lagging behind other cars in the market.
According to Silk Road Research, tension continues to be difficult for Tesla in China if the tension continues in the US and Chinese relations.
And how bad can the trade war be?
If you talk about history, the result of the trade war before today is always bad. It is believed that a kind of trade war had started with the amount of tax imposed by the USA in the 1930s and its impact was on the global market.
According to a study, between 1929 and 1934, the world trade decreased by 66 % and exports from USA and imports from Europe were two-thirds decrease.
No one is saying that we have reached that point, but due to uncertainty about this, the merchants are more upset than earlier times.
It can also have an effect of this feeling of “eye for an eye” between China and the United States that both sides go so far in annoying each other that fear of losing their image can be difficult for them to return.
Victor Mills, a chief executive officer of Singapore International Chambers of Commerce, says, “You start with protectionism and isolation, and after that, you make your neighbours poor and then they also make themselves poor.”
Many people in the business class are still hopeful that this will be the case for accusing each other and trying to reach an agreement.
But if this does not happen and if the fight progresses then everyone will be harmed – you and all of us will be involved in it.