China and U.S. trade tensions roil markets

James Wang ’21 – Index Staff

The ongoing trade war between the U.S. and China has consisted of a series of tariffs and trade barriers. The goal has been to force China to make changes to what the U.S. claims to be unfair trade practices. The main ones being trade deficits, theft of intellectual property, and forced transfer of American technology to China. President Trump, a long-time proponent of addressing U.S. trade deficits, made dealing with China a large part of his campaign and has advocated for tariffs and promoting domestic manufacturing.

     While some economists and politicians argue that the United States’ persistent trade deficit is problematic, many economists argue that it is not a problem. Few advocate tariffs as a solution, citing historical evidence that escalating tariff conflicts results in no winners.

     The trade war creates difficulties for farmers and manufacturers. The trade war has been criticized internationally; in the U.S., businesses and agricultural organizations have been very critical, though most farmers continue to support Trump. The European economy, especially Germany, as well as the Canadian economy, are especially vulnerable when facing the many negative effects of the trade war. Like the U.S., Britain, Japan, and South Korea are all showing a “weak manufacturing performance” in 2019. Globally foreign direct investment has slowed. Even among U.S. politicians, the response to the trade war has been mixed. Overall the trade war has significantly deteriorated the relations between the U.S. and China.

The trade war has caused uncertainty in the stock market.

     But how does the trade war affect student families? For one, the trade war has caused uncertainty in the stock market.

     On August 14, 2019, the Dow dropped 800 points, partly caused by increasing trade tensions between the U.S. and China. Nine days later, on August 23, the Dow dropped 223 points in five minutes after Trump “ordered” American companies to immediately seek alternatives to doing business in China; and the Dow went down 623 points for the day. There has also been an increase in the price of some items, including non-durable items like food and clothing, and durable items like cars and electronics, though the increase has been sharper for nondurable items. 

     Analysts also speculate that the trade war will affect Trump’s reelection because of the negative impact the trade war has had on farmers, which are a big group of voters for Trump.