ASSIGNMENT2

INTERNATIONAL RELATIONS

Prepared by:
Fatima( 22l-7999 ) BS-SE-4A

Submitted To:
Muhammad Asif

ASSIGNMENT # 2

THEME:

Current USA China trade war and its implications on

Pakistan

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Table Of Contents
Abstract................................................................................................. 3
Introduction.......................................................................................... 3
Problem Statement............................................................................... 4
Literature Review................................................................................. 4
Main Body / Discussion / Theme......................................................... 8
Results / Findings.................................................................................. 10
Way Forward / Recommendations...................................................... 11
Conclusion............................................................................................. 12
References.............................................................................................. 13

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1.ABSTRACT:
Pakistan has been significantly impacted by the US-China trade war, both in terms of its
economic and geopolitical dynamics. Pakistan's economic links to both of these global
economic heavyweights put it in a precarious position as they engage in tariff disputes and
economic conflicts. One the one hand, Pakistan and China have strategic and historical ties
thanks to the China-Pakistan Economic Corridor (CPEC), a centerpiece of the Belt and Road
Initiative. However, the US continues to be Pakistan's major trading partner and source of
assistance. Pakistan's imports and exports have been impacted by the trade war's increasing
market volatility. Pakistan's economy has had difficulties due to supply chain interruptions,
shifting exchange rates, and a decline in global demand, especially in important industries
like agriculture and textiles. Pakistan has also been forced to carefully manage its diplomatic
contacts in order to balance its interests between the US and China due to the geopolitical
ramifications of the trade war. To lessen the effects of the US-China trade war, Pakistan has
worked to expand its economic connections and diversify its trading alliances. Furthermore,
it is now crucial to make measures to strengthen the resilience of the domestic economy
through structural changes and better business environments. Pakistan is keeping a close eye
on the trade war and is quick to adjust its tactics to protect its economic interests and preserve
a delicate balance in its diplomatic relations with both major actors in the world.

2.INTRODUCTION:

Pakistan is attempting to preserve cordial relations with both global powers while navigating
a difficult diplomatic landscape against the backdrop of growing tensions between the USA
and China. The complex relationship between geopolitical alignments and economic
dynamics emphasises how crucial it is to comprehend how the US-China trade war is
affecting Pakistan's trade relations. Pakistan has strengthened its economic connections with
China, as seen by projects like the China-Pakistan Economic Corridor (CPEC) and the Belt
and Road Initiative (BRI), even though historically it has benefited from the strategic and
financial assistance of the United States. This research explores the complex aspects of the
US-China trade war, concentrating on how it affects trade in Pakistan. Both difficulties are
presented by the trade disagreement, which is indicated by the tariffs and chances for
Pakistan, hence it's critical to analyse the subtleties of this intricate international situation.
The study attempts to offer insights into how Pakistan might manage these difficulties and
take advantage of possible advantages in the changing global economic landscape as we
examine the processes that are unfolding.

3.PROBLEM STATEMENT:
There are worries about how the ongoing trade spat between the United States and China,
which has resulted in tariffs, may affect Pakistan's exports to the United States. It is critical to
comprehend the mechanics of trade as Pakistan manages its diplomatic relations with both
nations. The objective of this research is to clarify the precise impacts of the trade war on
Pakistan's export earnings, taking into account wider geopolitical and economic
ramifications.

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4.LITERATURE REVIEW: (Research Journal Articles)

The complex dynamics of the US-China trade war have had a huge impact on the changing
face of international trade. Previous studies have examined how this trade war affects
economies around the world and how it affects specific nations.

Researchers like Kerry Liu (2020) have examined how the US-China trade war has affected
the value of the Chinese yuan, providing information about trade surpluses and decreased
imports of US goods. Liu's research highlights the complex impacts on several aspects of the
economy.

Amiti et al. (2019, 2020) and Cavallo et al. (2019) have examined tariff distribution,
highlighting the cost incurred by American consumers and financial institutions. In their
contribution, Fajgelbaum et al. (2020) draw attention to the significant welfare loss in the
US because of tariffs. The combined findings of these research highlight the profound effects
of trade disputes on the state of the economy.

Notably, investment guru and co-founder of the Quantum Fund Jim Rogers has eloquently
highlighted the negative aspects of trade conflicts, stating that they are bad for everyone
concerned (Dawn, 2018). These observations from well-known financial professionals offer a
useful viewpoint on the wider effects of trade disputes.

By particularly analysing the effects of the US-China trade war on Pakistan's trade position,
this study seeks to add to the global conversation and the body of literature. It does so by
providing a nuanced understanding of how this geopolitical manoeuvring affects a country
that is closely linked to both economic powerhouses.The complex dynamics of international
trade have had a substantial impact on its evolving landscape the US-China trade war's
dynamics. Previous studies have examined how this trade war affects economies around the
world and how it affects specific nations.

Researchers like Kerry Liu (2020) have examined how the US-China trade war has affected
the value of the Chinese yuan, providing information about trade surpluses and decreased
imports of US goods. Liu's research highlights the complex impacts on several aspects of the
economy.

Amiti et al. (2019, 2020) and Cavallo et al. (2019) have examined tariff distribution,
highlighting the cost incurred by American consumers and financial institutions. Fajgelbaum
et al. (2020) make a contribution by drawing attention to the significant welfare loss brought
about by tariffs in the US. Together, these studies highlight the wide-ranging effects of trade.
conflicts over financial security.

Notably, investment guru and co-founder of the Quantum Fund Jim Rogers has eloquently
highlighted the negative aspects of trade conflicts, stating that they are bad for everyone
concerned (Dawn, 2018). These observations from well-known financial professionals offer a
useful viewpoint on the wider effects of trade disputes.

By particularly analysing the effects of the US-China trade war on Pakistan's trade position,
this study seeks to add to the global conversation and the body of literature. It does so by

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providing a nuanced understanding of how this geopolitical manoeuvring affects a country

that is closely linked to both economic powerhouses.

5.MAIN BODY:
Global economies are significantly impacted by the growing trade tensions between the
United States of America (USA) and China. Pakistan is at a juncture in its geopolitical
dynamics where economic diplomacy is needed. This section explores the subtleties of the
trade war between the US and China and how it has affected Pakistan's export market in
several ways.

A complex commercial environment is created by the intricate network of international

relations that exists between the United States of America, China, and Pakistan. Pakistan,
which has traditionally sided with the United States, is currently faced with striking a balance
between its growing economic links to China and its own economic interests. The Pakistani
government must balance advancing diplomatic ties with defending its economic interests as
the trade war rages.

The trade trajectory of Pakistan historicallyThe ongoing issue is made more complex by
relations with both superpowers. The United States of America is a reliable supplier of
international aid, especially in times of crisis like the war on terror. It is a historic strategic
partner. On the other hand, as evidenced by the China-Pakistan Economic Corridor (CPEC),
China's economic influence in Pakistan has grown considerably. The Belt and Road
Initiative's (BRI) main project, the China-Pakistan Economic Corridor (CPEC), has
significantly increased infrastructure spending in Pakistan and changed the country's
economy.

China and the United States have been involved in a trade spat characterised by counter-
tariffs and tariffs at the same time. China's exports to the USA have decreased by 39% as a
result of the US imposing tariffs on Chinese goods. The subtle aspect emerges when Pakistan
appears in this intricategeopolitical dance exports to the United States have decreased by 3%.
The empirical findings highlight the interdependence of world commerce and the actions
made by major actors having an impact on smaller economies.

India and Bangladesh come out as surprise winners, with a 39% and 50% growth in exports,
respectively, while Pakistan experiences a slight dip. These disparate results highlight the
complexity of trade diversion and the calculated decisions nations make in reaction to the
changing dynamics of international commerce.

Pakistan is facing two challenges: the US-China trade war and regional geopolitical
developments like the US peace deal and the Taliban. China is investing billions of dollars in
energy and infrastructure projects in Pakistan as part of its efforts to strengthen its strategic
and economic ties with the country. On the other hand, the USA, which has always been
crucial in helping Pakistan through periods of global adversity, is currently advocating for a
review of the two countries' bilateral relationship.

Pakistan is tackling these issues with a diplomatic balancing act, trying to strengthen
economic ties with China and mend fences with the United States. Astute diplomatic
manoeuvring is essential due to the complex interplay among security concerns, economic

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imperatives, and geopolitical factors.

Another layer of difficulty to trade is added by the US administration's criticism of China's

involvement in the CPEC, calling it a debt trap. Pakistan must carefully manage its economic
relations to maintain a delicate balance between the USA and China in light of the
accusations and counter-accusations.

As the COVID-19 pandemic's aftermath is being dealt with globally, There are more changes
to the economic environment. Pakistan's economic connections with the USA and China are
significantly shaped by regional stability, counterterrorism initiatives, and discussions with
international financial institutions.

6.RESULTS:

The empirical findings are briefly presented in the results section, with a focus on the
percentage changes in exports for each nation. The trends that have been seen underscore the
complex impacts of US tariffs on China and the consequent fallout for Bangladesh, Pakistan,
and India. The statistical results offer insightful information on how the US-China trade war
has affected trade patterns.

7.RECOMMENDATIONS:
• Market diversification is vital given the noted drop in Pakistan's exports to the United
States during the trade war. In unstable geopolitical environments, examining and
developing economic ties with other markets might help reduce reliance on a single
economy and offer stability.
• Pakistan ought to have a proactive, flexible trade strategy that reacts quickly to
shifting international conditions. This entails keeping a constant eye on changes in
tariffs, adjusting export plans to reflect changing trade trends, and seizing new
chances in expanding markets.
• Pakistan needs to concentrate on value addition in its sectors in order to increase
export competitiveness. Enhancing the quality of Pakistani exports can increase their
resilience to tariff impacts and increase their appeal to international buyers. This can
be achieved through investing in technology, innovation, and quality improvements.
Participating Renegotiation of trade agreements with the USA becomes essential in
diplomatic endeavours. Pakistan ought to proactively pursue channels of
communication and agreement, stressing the reciprocal advantages of collaborative
commerce. Improving diplomatic relations can help create a more advantageous
trading environment.

8.CONCLUSION:

The study's conclusion emphasises how Pakistan's exports to the United States have suffered
as a result of the US-China trade conflict. Pakistan's exports are down somewhat whereas
China's fall is more significant. The divergent favourable results for Bangladesh and India
point to the necessity of taking strategic factors into account when navigating the changing
landscape of international trade. This analysis offers a foundation for well-informed policy

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decisions and advances a comprehensive knowledge of the effects of the US-China trade war
on Pakistan.

9.REFERENCE:

• Main : Keeryo, Z. A., Mumtaz, J., & Lakhan, A. B. (2020). US-China Trade War and its
Impact on Pakistan Exports. Global Economics Review, 5(3), 1-10.
https://doi.org/10.31703/ger.2020(V-III).01

• Amiti, M, S.J.Redding, & D.E. Weinstein. (2019). The Impact of the US Trade War: A
Longer-run Perspective. Journal of Economic Perspectives, 187-210.
Board of Investment. (2020). Foreign Investment Trend . https://invest.gov.pk/statistics

• Silva, S. J.M.C. and Tenreyro, S. 2006,The US-China Trade War Reaches a Truce: China
Market Lessons to Learn. https://www.china-briefing.com/news/us-china-trade- war-
reaches-truce-china-market-lessons-learn/