During the past few years, the two biggest economic powers, the United States and China, have experienced increasing tensions with each other due to tariffs and taxes. The past year has contributed to those rising tensions, especially with the Trump administration’s extreme approach to conflict resolution. The U.S. government recently placed a 12% tariff on $112 billion worth of Chinese goods. This action was taken to demonstrate their dominance over the economic rivals. The recent tariff not only put a strain on the immediate price of goods, but also the supply chain of the economy. This ultimately forces companies to raise prices of goods in response to the sanctioned tariffs, Especially after China has been using various tactics to become a world-dominant power after dominating the Asian market, the U.S. did not want to back down against the Asian giant. However, in the recent turn of events, the U.S. seems likely to take losses in the trade war with China.
On Oct. 11, China and the United States met to discuss new negotiation guidelines for future trades. In contrast to previous agreements and deals, the negotiation ended in talks about easing tensions and decreasing tariffs. Although the conference ended with only vague terms about future agreements, both sides were working to find a way to ease tensions. There are many factors for such a sudden change in attitude in terms of economic interaction between the two giants, especially the U.S.’s change in tone toward China.
A huge factor is that both countries have suffered economic losses by establishing a wall of tariffs against one another. Despite the conflicts, they are both each other’s most profitable and marketable country. The United States holds a lot of global power and therefore has a lot of influence over the international monetary flow. China, on the other hand, is a very marketable country just for the sheer number of people living in the country. It is inevitable that they would want to come to an agreement that allows them to bring down the economic pressure between them, especially the U.S., who has reasons to want to end the trade war, even with losses.
There are two main reasons that the U.S. wants to end the trade war and come to a conclusion despite the huge possibility of taking losses. For starters, the U.S. is facing an imminent economic crisis. The Federal Reserve has been getting ready to cut interest rates if the U.S. and China does not come to an agreement soon. If the Federal Reserve cuts the rates, then it is an indication that they want to stimulate the economy because it is falling apart. The U.S. is now trying to gain their biggest economic partner back to help improve the economy.
Another reason why the U.S. will try to end the trade war is due to the upcoming election. President Trump is currently running for reelection and likely does not want to make rash decisions. To make the most beneficial economy for the U.S., it would be in Trump’s favor to end the current conflict with China before the situation gets worse. Not only is Trump trying to end the trade war, but other candidates will work toward concluding it to gain the favor of voters. Therefore, it is likely that the trade war between the U.S. and China will come to an end with the U.S. taking losses.