Question

Hello, i want a complete answer in about 500 words for this question:

-what is the economic impact in the short term and in the long term of the tariffs between US and CHINA.

Answer 1

A trade war is when tariffs or quotas are imposed on imports by a country and foreign countries retaliate with similar forms of trade protectionism. A trade war is diminishing international trade as it escalates.

While the U.S.-China trade war would probably have limited immediate macroeconomic impact in the near future on either country, the long-term consequences for global supply chains, U.S. business sentiment, and consumer buying power are that. This will help bring the aggregate reading of inflation closer to the United States. The target of the Federal Reserve. Nevertheless, any uptick in inflation caused by a one-off rise in tariff rates will likely be seen as temporary by the Fed. Nonetheless, a major downturn from the trade dispute in domestic demand is likely to lead to rate cuts. The central bank is in wait-and-see mode for now, but there has been an increased likelihood of a "insurance" rate cut.

Government spending probably gave a near-term incentive to consume to American households and businesses. Since the output gap is positive and there is no substantial supply-driven boost to growth expected from fiscal expenditure, this is likely to mean a lift to demand with only marginal gains in productivity. The stronger economy also implies a higher currency, which suggests that more money will end up abroad, buying relatively cheaper goods than in the U.S., and contributing to an already large trade deficit.

President Donald Trump wants to cut the US trade deficit of $621 billion. It has been the largest in the world since 1975. Reducing the deficit is part of Trump's job creation policy. Most of the U.S. deficit was due to American demand for imported consumer and industrial goods. The U.S. imported $648 billion in medications, television, clothes, and other household items in 2018. Just $206 billion of these consumer goods has been exported. That alone raised the debt to $442 billion. America imported vehicles and parts worth $372 billion, while exporting just $159 billion. That contributed to the trade deficit another $214 billion.

Trump administration proposed a tariff of 25 percent on steel and a tariff of 10 percent on aluminum imports on March 8, 2018. It said reliance on imported metals is undermining the ability of America to produce weapons. The Council for Aerospace Industry said Trump's tariffs would instead raise the costs of the military.

The U.S. Congress is the only tariff-imposing body allowed. But in 1962, the president was allowed to limit imports that threatened national security. The World Trade Organization can not adjudicate security-related trade disputes.While that the trade deficit, Trump wants to limit transfers of U.S. technology to Chinese firms. China allows foreign companies to share their trade secrets when selling products in China. The administration also requested China to stop subsidizing its "Made in China 2025" program for the 10 sectors prioritized. These include robots, computers, and aerospace. China is also planning to be the largest artificial intelligence center in the world by 2030. Chinese requests are unlikely to be considered.

China is the No.1 exporter in the world. The comparative advantage is that consumer goods can be manufactured at lower costs than other countries can. China's living standards are lower, allowing its businesses to pay lower wages. American businesses are unable to cope with the low cost of China, thereby reducing U.S. manufacturing jobs. Of course, Americans want these items at the lowest prices. For "Made in America," many are unwilling to pay more.