Task #07&8

Submitted to:
Dr Nasira Majid
Submitted by:
Muhammad Ibrahim
(22020920-099)
Course Title:
International relations and current affairs
Course code:
MGT-226
3rd Semester (Section B).

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 How can Pakistan take benefits in US-China trade war
Trade war:
The issues at the heart of the trade dispute included concerns over intellectual property
theft, forced technology transfer, trade imbalances, and other structural issues in the U.S.-China
economic relationship. Negotiations between the two countries took place intermittently, with both
sides imposing tariffs on each other's goods, creating uncertainty in global markets.
It's important to note that the situation may have evolved since my last update, and I recommend
checking the latest news sources for the most current information on the U.S.-China trade
relationship. Geopolitical and economic dynamics can change, and new developments may have
occurred since then.

In summarise:
The U.S.-China trade war commenced when both nations escalated tariffs from 8% to
15% on imported products, creating disruptions in trade. President Trump of the United States
imposed higher tariffs on Chinese imports with the aim of bolstering domestic production. In
response, President ZHANG of China asserted that the U.S. initiated the trade war by implementing
these measures, marking the beginning of hostilities in the trade relationship.

Pakistan could potentially benefit from the U.S.-China trade

war in several ways:
Low tariff offers:
The commencement of the US-China trade war occurred with the increase in
tariffs imposed by the United States on imports from China. Pakistan strategically stands to gain
optimal benefits by offering low tariffs on products imported from China. This initiative aims to
promote and incentivize Chinese manufacturers to relocate to Pakistan, providing them a favourable
environment to circumvent the high tariffs imposed by the US. The advantages lie in the cost-
effectiveness and the availability of low-cost labour in Pakistan, making it an attractive proposition
for Chinese businesses seeking alternatives amid the trade tensions.

Export Opportunities:
Pakistani exporters might find new opportunities to sell goods to the U.S.
market that were previously supplied by China. This could be particularly true for products that are
not subject to tariffs or where Pakistan can offer competitive prices.
Thanks to an enduring relationship with the US, China initiated a substantial financial project known
as the China-Pakistan Economic Corridor (CPEC) in 2013, originally valued at 46 billion US dollars.
Over time, this investment has expanded to approximately 70 billion US dollars. In the fiscal year
2019-2020 (July-March), Pakistan experienced a noteworthy trade dynamic with the US, exporting
goods worth 471 billion dollars, while China exported products valued at 271 billion dollars to
Pakistan during the same period. Osama Rizvi emphasized the significance of the trade ties between
these nations for Pakistan, underscoring the substantial impact of the trade relations between the
three countries.

Investment Shifts:

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 Companies looking to relocate their manufacturing operations due to increased
costs in China might consider Pakistan as an alternative destination. This could lead to increased
foreign direct investment (FDI) and job creation in Pakistan.

Textile Industry:
Pakistan has a significant textile industry. With increased tariffs on Chinese
textiles, Pakistan could potentially gain a competitive advantage in supplying textiles to the U.S.
market.

Default of American economy

The Toll of the Trade War: Economic Strain on the U.S. and China:
The trade war inflicted economic hardships on both China and the United States,
resulting in diverted trade flows. Heather Long of the Washington Post highlights the consequences:
slowed U.S. economic growth, frozen business investment, reduced hiring, widespread farmer
bankruptcies, and downturns in manufacturing and freight transportation not witnessed since the last
recession. Trump's actions are likened to one of the largest tax increases in years.

The Economic Toll of the Trade War: Job Losses, GDP Impact, and Stock
Market Fallout in the U.S:
In September 2019, a Moody’s Analytics study revealed that the trade war had
already resulted in the loss of nearly 300,000 jobs and an estimated 0.3% decrease in real GDP for
the U.S. Other studies suggested a higher cost to U.S. GDP at around 0.7%. A 2019 report from
Bloomberg Economics projected the trade war's impact on the U.S. economy to reach $316 billion
by the end of 2020. More recent research from the Federal Reserve Bank of New York and Columbia
University indicates that U.S. companies suffered losses of at least $1.7 trillion in the value of their
stocks due to the tariffs imposed on imports from China.

U.S. Tariffs: Costly Implications for Companies, Jobs, and Economic Sectors:
Numerous studies have found that U.S. companies primarily paid for U.S. tariffs,
with the cost estimated at nearly $46 billion. The tariffs forced American companies to accept lower
profit margins, cut wages and jobs for U.S. workers, defer potential wage hikes or expansions, and
raise prices for American consumers or companies. A spokesperson for the American Farm Bureau
stated that “farmers have lost the vast majority of what was once a $24 billion market in China”
because of Chinese retaliatory actions.

Fiscal Policies:
In response to economic challenges, the government swiftly implemented a series of
fiscal measures to stabilize the economy.

Stimulus Packages:
In reaction to the crisis, the government introduced three stimulus packages
totalling $2.5 trillion. These funds were injected into the economy, providing a crucial boost to
consumer spending and business activities.

Tax Adjustments:

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 To stimulate investment and hiring, businesses were incentivized through tax
adjustments. Temporary reductions in corporate tax rates led to increased capital expenditure.

Trade Dynamics: U.S.-China Deficit Shifts and Unintended Consequences of

Tariffs:
Meanwhile, the U.S. goods trade deficit with China continued to grow, reaching a
record $419.2 billion in 2018. By 2019, the trade deficit had shrunk to $345 billion, roughly the same
level as 2016, largely as a result of reduced trade flows. It should be noted that, while the U.S. deficit
with China decreased, its overall trade deficit did not. Trump’s unilateral tariffs on China diverted
trade flows from China, causing the U.S. trade deficit with Europe, Mexico, Japan, South Korea, and
Taiwan to increase as a result.

Interest Rates:
Lowering interest rates to near-zero levels by the Federal Reserve made borrowing
more affordable for businesses and consumers. This move encouraged investment and provided
support to the housing market.

Money Supply:
Through open market operations and quantitative easing, the Fed ensured ample
liquidity in the financial system, preventing credit crunches.

Renewable Energy Sector:

The renewable energy sector experienced remarkable growth, with investments
surging by 40%. This not only contributed to reducing carbon emissions but also created a robust job
market.

Was the trade war worth it?

Both the United States and China agreed to stop the trade war in a ceremony at the White House.
President Trump and Chinese Vice Premier Liú Hè were part of this ceremony. The agreement is not
fully shared with the public, but it seems China promised to buy an extra $200 billion in American
products over two years, more than what they bought in 2017.
The public part of the agreement says China will protect American ideas and stop taking new
technologies by force. They also promised not to lower the value of their money on purpose to win in
trade. If there are arguments, there's a plan to put taxes on things China sells to the U.S.
But, in the six months since they agreed, it looks hard for China to buy all the things they promised.
Reports say they only bought 23% of what they should have by now. This might be because of
COVID-19, but some of it is because the plan was tricky from the beginning. In the first part of the
deal, China said they would buy $60 billion more of U.S. things than they did in 2017. But right
now, the U.S. is selling less to China than in 2017."

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