The Beneficiaries of US-China Trade War
A trade war brings destruction to the nations involved. However,other nations usually benefit from such a situation. This is what happened in the United States as well. After World War-2, when the rest of the world was bickering, America made its fortune selling goods and services to the warring nations. The same situation has arrived again. Only this time, it isnt a military conflict, but a trade war that is causing worldwide disruptions. Also, America is not a beneficiary of this war. Instead, it is on the losing side of this conflict. Ever since Donald Trump has levied tariffs on the import of Chinese goods, a conundrum has broken out.
America and China are the first and second largest economies in the world respectively. They traded extensively with each other. Since both countries are now looking to break these trade ties, new countries stand to gain market share. The Sino-American trade war will provide positive economic benefits to many nations. Some of the prominent beneficiaries have been listed below.
Mexico: The biggest beneficiary of this trade war will be Mexico. This is counter-intuitive because it is a known fact that President Trump is not in favor of the Mexicans. However, at the present moment, America imports a large chunk of its electronics from China. A 25% tariff on electronic products from China will make it unviable to continue importing. Since manufacturing in the United States is really expensive, American companies will look for alternate sources.
Mexico is the perfect supplier in this case. It sits right at the doorstep of America. Hence, planning a supply chain will be easy and also less expensive. Also, America and Mexico are trade partners as per the NAFTA agreement. Donald Trump has not yet pulled out of NAFTA. This means that Mexican companies can still export products to America with no import tariffs. As a result, it is likely that the void created by the absence of Chinese electronic products will be filled by Mexican products.
Australia: China imports a large portion of its food grain requirement. At the present moment, China is importing in large quantities from America. However, China has also slapped retaliatory tariffs on American food grain production. Hence, importers in China will find it expensive to continue importing American grains. Hence, they will have to look for alternate sources. This is where Australia perfectly fits the bill.
Like the United States, Australia also has vast swathes of land which are used for agriculture. Australia produces much more food grains than it can possibly consume. On the other hand, China has a consistent demand for grains. Hence, it is likely that China will start importing from Australia in the aftermath of this trade war.
Asian Economies: American companies like Wal-Mart get all of their merchandise produced in China as of now. This includes apparels and household items like curtains, towels, etc. This steady supply chain is going to be needlessly disrupted by a trade war. Hence, American companies will have to find an alternate source. They are likely to approach other Asian economies like Bangladesh, Thailand, and Philippines. The reason is that these economies also low costs of production like China. Although they lack in necessary infrastructure, they are the closest replacement that American companies can find. The contract manufacturing of these products will now, most likely be awarded to companies in smaller Asian countries.
Germany: America is importing a lot of Chinese cars. With the introduction of tariffs, the import of this trade will also be disrupted. Only Germany can compete with China in the production of cars. Since the quantity of imports from China will reduce, it is likely that the quantity of imports from Germany will rise to fill the void. This will make Germany a beneficiary of the ensuing trade battle between America and China.
Iran and Russia: China has a huge requirement for energy products like oil. This is because a booming economy like China consumes large quantities of oil. For now, China was sourcing most of its oil requirements from the United States. Also, China would source some of its requirements from the Middle East which is a known American ally.
China is likely to stop this import in a bid to weaken these economies. Now, oil is a restricted commodity which many nations do not have supplies of. Hence, China may have to collaborate with rogue nations like Iran and Russia which are currently facing international sanctions. This would mean that China is breaking some rules and guidelines laid down by international trading bodies. However, in this war situation, China is going to be less concerned about rules and more concerned about winning. Hence, they will continue to trade with these nations. From the point of view of Russia and Iran, this is a windfall gain that can be attributed to the lax policies being created by President Trump.
To sum it up, the economic fortunes of many nations in the world are going to change because of the introduction of tariffs by the Trump government. The policy will have several side effects which were not thought through by the American government.
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