Tit for tat: The US-China Trade War

What’s Going On Here?

The trade war between the US and China has intensified with the US imposing a 25% levy (tax) on 818 Chinese goods. China retaliated almost immediately with an identical 25% levy on 545 US products.

 

What Does This Mean?

The tariffs each amount to a total worth of $34bn, and appears to signal the start of a worrying head-to-head between the world’s two largest economies. The initial move by the US and Donald Trump has been portrayed as a way of protecting US jobs and preventing American intellectual property and technology from being cheaply and unfairly exploited by Chinese companies. However, the repercussions could potentially be greater than what the Americans imagined.  

 

Why Should Firms Care?

There are worries that a trade war such as this could be hugely harmful for thousands of companies and the global economy as a whole. Many companies thrive off exporting goods from China to the US and vice versa, and it is inevitable that these tariffs will negatively impact these business arrangements significantly. The increased costs to companies caused by the tariffs will show up in the form of higher prices for consumers.

The possibility of a trade war that stretches on for years will be of great concern to international law firms. Many of their clients will be large global companies that rely on trade deals with China and the US, and with the news that President Trump might be planning further tariffs, it will be incredibly difficult for such firms to advise their clients due to the uncertainty as to which products will be affected and how badly these products will be affected. Even more worrying is that there does not appear to be any end game. China have denied any wrongdoing regarding unfair trading practises and the abuse of US intellectual property and have announced that they are willing to continue to retaliate to any US tariffs with similar ones of their own. 

The only foreseeable way in which this trade war could be halted is if China promises to change its practises, or the US agrees to reduce the tariffs it is currently imposing. At the present, neither scenario appears likely.

 

Article written by Matthew L.

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