USA-China Trade War and International Business

Prof. Zdzisław W. Puślecki

The main aim of this paper is presentation the potential implications of a trade war between the United States and China for international business. China will be significantly hurt by tariff trade war in all indicators, including welfare, gross domestic product (GDP), manufacturing employment and trade. However, it is pointed out that although there will be definite impacts on China, the costs should be maintainable and will not severely damage the Chinese economy. In regard to the United States, the simulation produced results that described, the US will gain on welfare, GDP and non-manufacturing production, but hurt employment and trade (both export and import). Since each nation maintains a large economy, their actions affect not only each other but also the entire world. As a result of the trade war, the simulation predicts that the rest of the world will also see impacts within their economies. For most large and developed nations, they will see positive benefits from a US-China trade war. As trade decreases between the United States and China, the trade will presumably increase between other nations as a result. For example, within the rubber industry, both Chinese and international companies are readying the restructure of their supply chains by shifting the manufacturing of rubber products from China to neighbouring Asian countries, Vietnam and Malaysia. However, smaller nations will see significant negative impacts. For example, World total welfare, GDP, manufacturing production and employment, export, import, and total trade are expected to decrease since many of these nations are highly trade dependent.