The U.S. – China Trade War Harvard Case Solution & Analysis

The U.S. - China Trade War Case Study Solution

Lack of Reciprocity:

Another accusation of the trump towards the china is that the tariffs in china are much higher in comparison to the U.S. according to the trump when the car is sent to China from the U.S, there would a tariff to be paid of 25% however when the same car send to us from china tariff to be paid of 25%. This creates a lack of mutual benefit for the country.

Stealing jobs:

The import of goods to U.s is considered to be less expensive for the U.S rather than the manufacturing of these goods in the U.S. this increase the unemployment rate in the U.S. as trump stated that in 2018, we have lost around six million jobs by shutting down of 60000 factories in our country.

Most of the trump accusations towards china are not fair.As China is an exporting country so the devaluation of the currency for china is considered to be good. However, it is not expected that china had devalued its currency. According to the Premier Li Keqiaing publically stated that consistently devaluation of currency considered to be unfavorable for the country rather than providing benefit tom the country. Furthermore, the IMF also announced that the currency of china is not devalued and broadly in line with fundamentals. Furthermore, when the trump comes in a power he broke his promise and stated that why we called China a currency manipulator. All these statements and the back of trump from his promise shows that china is not involved in the currency devaluation and the Trump accusation against china is not fair.

However, the U.S balance of payment is in deficit which is considered to be a threat to the country. In order to reduce this threat, the country must improve its trade relationship with China. However, some of the experts analyzed that the labor rate in China is higher than the U.S and its impact on the U.S was outdated so the trump accusation is not right in these terms. Rather than claiming to china trump should improve the economic condition of its country in order to become a more dominating player in the market.

Trade War a good idea:

China and the U.S. are the largest economies in the world and the trade war between these two countries will only depress the economic growth of both countries further. Moreover, witnessing from the past experiences of trade wars which includes the Smooth-Hawley Act which was implemented to support U.S. farmers lead to reeducation of international trade by 65% and turned the U.S. economic recession to a great depression and initiated the World War II. As a result of the 1965 trade war, the USA’s economy took ten years to recover from the aftermath of the war. (The balance, 2019)

In addition, the U.S. China trade war has reduced the GDP of the country by 0.6%. Moreover, the farmers residing in the belt of Illinois and Indiana suffered a reduction in income level by $11.8 billion as a result of retaliated tariffs imposed by China and Europe’s exports. Similarly, in the year 2018, various countries sign trade agreements that exclude the U.S. Furthermore, the Chinese economy will be suffered more due to the trade war as compared to the U.S. considering, China exports more to United States than it imports from the United States.  The increase in the tariffs on steel and aluminum imports lead to a reduction in profits of various automakers who shifted the cost effect on the consumers by charging high prices. In addition, as a result of increased tariffs on imports, Canada and Mexico also raised the tariffs on imports from the U.S. in retaliation.

On the other hand, other countries are also drawn into the conflict between the U.S and China. Although, Vietnam and Mexico benefited from the trade war as Vietnam exports increase dot $290.4 billion from $171 billion in 2016, considering, the trade war lead to increased wage rates in China making Vietnam more attractive. (Wired., 2019)In addition, the tariffs will reduce the demand for goods manufactured in China whose components are imported from other countries. This will affect the economic growth of other countries as well considering, their exports will be reduced. Moreover, the stock prices in the U.S. and other countries decline by 900 points were also indirectly affected due to global value chains linked with the trade war. The decline in stock prices made Chinese imports in the U.S. less expensive, reducing the profits for U.S. companies operating in China. (Taylor, 2019)


It is concluded that from 1968 to 2016, China succeeded to acquire 13.8% global export share and at the same time, U.S signed a multi-lateral trade agreement, TTP (Trans-pacific Partnership), to prevent China to enter into Asia pacific regions and made trade rules. Donald Trump's meeting with Xi Jinping- G20 raised many questions about the trade war between the two countries. China’s response toward this meeting was uncertain and Donald Trump regards this meeting as the productive and efficient one through which a war could be resolved efficiently. The trumps’ accusation, retaliation and high tariffs made the trade war intense. While China thought that the U.S. will continue free trade agreements in the future and on the other hand, American analyst believes that this economic liberalization will turn in political liberalization...............................


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