The Battle of the Superpowers

The two driving engines of the global economy have been locked in a trade war since July 6, 2018, with the United States imposing a 25% tariff on $34 billion worth of Chinese imports. While Trump claims tariff policy to be a practice to encourage the consumption of American products by making imported goods and services more expensive, it is, in fact, a tool adopted by the US to force China to make changes to its “unfair trade practices” (as termed by the United States). Economists are viewing this trade war as a by-product of the ongoing battle between the two nations for economic and technological world dominance, along with a wave of nationalism, protectionism, and self-reliance growing almost everywhere including the US. The trade war has adversely affected the economic growth of both China and the United States. With the onset of COVID-19, the grievances have increased and a sharp fall in the GDP has been observed in both the nations. The impact of the trade war is not limited to these two parties, the global economy too has witnessed a slowdown owing to the influence that the US and China possess on the world.

The industrial growth rate has hit its seventeen-year low in China, a clear indication of the heavy brunt being felt by China. The trade war continues to threaten the rising global economic influence of China and exerts downward pressure on Chinese economic growth. Experts on the Chinese economy view this war as fatal for business operations and believe that it is likely to leave a long-lasting adverse impact. They view it as the American leadership’s eloquence disguised for selfish national interests and the desire to maintain American hegemony, which has been at play ever since the States ended its cold war with the Union of Soviet Socialist Republics (USSR). The domestic reporting on the trade war is censored in China, the situation on the ground is difficult to comment upon, but Chinese social media has managed to throw some light on the adversities by drawing reference from the Marvel Comics wherein Thanos, the villain wipes out half of all the life in the universe using the infinity gauntlet (a superpower); similarly, Trump is believed to wipe out half of China’s investors and businesses using this superpower of tariff policy. The halt in the manufacturing sector in China can be observed by understanding these events from the Chinese industrial city, Dongguan. This sprawling manufacturing hub Dongguan, nicknamed as the ‘Workshop of the World’, is the hardest hit by the ongoing trade war. The impact isn’t limited to the manufacturing sector alone, food joints and other budgeted sources of entertainment in and around the industrial complexes of Dongguan have been shut down too, the bars that were mostly over-crowded during shift changes in the factories now accommodate empty chairs. Dongguan produces and exports a majority of chunk to the United States, and specialises in shoes and brightly coloured plastic bags (for detergents, candies, apparels, dog poop and other essentials needed by Americans in their daily lives), with a double-digit tariff on these goods, the loud noises of the machines in the factories have been muted. Workers residing nearby have begun to migrate back to their native home-towns as America shifts the hub to Vietnam and Indonesia, dropping China’s exports to the US (the country it exported more to than any other country) by 12%. The Chinese economy finds itself in a swamp due to a number of structural lags like the failing banking system, lack of low-skilled workers in the factories, economic over-reliance on manufacturing, ageing workforce, etc., followed by a trade war.

The tariff policy has not been a cake-walk for the United States too, with 3 million people losing their jobs, the US economy has come to a standstill. The consumers, businessmen, investors and farmers have expressed their dissent on the tariff policy inflicted by Trump’s administration. Though the effect felt on American exports is comparatively smaller than its Asian rival, a number of businesses and various industrialists in the manufacturing sector have felt the brunt. The lower profit margins have infuriated American companies and the farmers protested against the $24 billion worth market they lost in China as a result of retaliatory actions from the American rival in the Asian continent. While America explores new opportunities outside China to compensate for the goods it imported from the dragon, the prices continue to inflate in the American market. Is the trade war worth the pain it has caused to the American economy, which is in the worst shape since the Great Depression?

Various emerging economies have been fortunate enough to draw the attention of the American, European and Japanese investors to import the substitutes from countries like Indonesia, Vietnam, Singapore, India and others. A switch in the wave of the global market shall take time to adjust and establish a smooth-sailing ride for the world, but at present, the European market is being strangled the most because of the uncertainty that prevails in the global market. The United States of America and the European Union have always worked in coordination and agreement in like-minded economic organisations and the US continues to be Europe’s most important trade and investment partner. Thus, America’s inward-looking policies have been a matter of great concern for the European countries as well. With the global wind against China amidst the blame-game for the pandemic and China’s furious economic behaviour in the market, the European continent cannot afford to turn its neck towards the Asian giant. Europe too has expressed its grievances on the unfair trade practices by China and has expressed its concerns over the theft of intellectual property by China.

Nevertheless, the EU can manage to carve its niche in the global market by accommodating the void the two rivals create in each other’s trade. Similarly, Britain too can utilise this opportunity to establish its financial and tech markets in Washington and profit from the growing dissent between the States and the Dragon. Apart from Europe, India too should utilise this opportunity by making a shift in its manufacturing sector as both the US and China are likely to shift their investment flow towards India. Indian exporters should definitely take the risk to explore the gap that the trade war will generate, as the US imposes higher tariffs on Chinese goods and vice versa, this is the most awaited chance for exporters to fiddle and find a space in both the markets. Xiaomi, known as China’s Apple (iPhone), has the largest market in India outside China, India can and should definitely use this opportunity to establish a strong profit margin for itself. While India gained about $775 million additional exports from the US, Apple is likely to shift its base for manufacturing in India, which would make it the largest assembler of iPhones.

The trade war has definitely teetered the global economy to uncertainties and an unprecedented slowdown, the global pandemic made it more difficult for the economies to survive this wind and stand tall in the global market. Whether America continues to maintain its hegemony or China will take over the global market, will remain an unanswered question for a while until the world revives and breathes into a fresh economic environment post the COVID-19 period.


Vanshika Sighroha

A woman with opinions and confidence to voice them out freely, I am currently pursuing my majors in Economics. With a love for food, books and movies, I also love to write and further expand my horizon. I find my solace in travelling and good music!

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