U.S.-China trade war escalates as both sides implement more tariffs

Jess Kaplan, Senior Writer

More than 100 billion bananas are eaten around the world each year. Yet very few people know that the banana trade once turned into a trade war. The “banana wars” were a culmination of a decade-long argument between the United States and Europe. It all began in 1998 when European companies started to import their fruit from former colonies tax-free as a way to aid their developing economies. Meanwhile, Europe imposed strict tariffs on American banana production, thus discouraging buyers from purchasing American fruit. The United States retaliated by taxing European luxury goods. Tensions began to escalate and each side continued to place steep taxes on each others’ products until it escalated into a full-on trade war. Over the past few months, the United States and China, two of the world’s most powerful economies, have threatened colossal taxes against one another, which is beginning to mirror the banana wars.

 

The United States imports more products from China than any other country. In 2017 alone the United States imported $505 billion dollars worth of goods from China, ranging from technological necessities like electrical machinery to everyday essentials like sneakers. However, the United States only exported $130 billion worth of products to China, which in turn created a $375 billion gap between the goods consumed. America’s strong economy gave consumers the confidence to purchase more goods. Ironically, this strength backfired as Americans purchased more Chinese goods than American ones, increasing the trade deficit.

 

Following up on his campaign promise, President Donald Trump has been enacting tariffs on imported goods from China that are also manufactured in the United States to help fix the trade deficit. China retaliated against these tariffs by imposing their own on American imports worth approximately $3 billion. Less than 24 hours later, Trump impulsively issued a new set of tariffs on 1,300 types of Chinese goods under the rationale that the tariffs were a punishment for a Chinese violation of intellectual property back in August, according to The Washington Post. The day after that, China upped the ante, yet again proposing tariffs on the agriculture and automobile industries, prompting Trump to propose an additional set of tariffs on $100 billion of Chinese goods.

 

The United States and China each attempted to assert their dominance by repeatedly one-upping the other in order to uphold their economic might and powerful roles in the global market. Originally, Trump instituted tariffs as a way to preserve the U.S. manufacturing industry and decrease America’s reliance on foreign goods, yet his excessive taxes have become a venue for America to assert its global power in the face of China’s emerging economy.

 

Meanwhile, China is confident that it can win a trade war with America. For one, the Chinese government has authoritarian control over their economy and media; both of which discourage political dissent. Despite Trump’s efforts to reduce the trade gap, economists agree that his policies will be largely ineffective as the size of a trade deficit is also determined by the growth rates and currency values of the other countries they trade with.

 

Therefore, while these tariffs will narrow the trade deficit with China, it will most likely lead to an increase in its trade deficit with neighboring Asian countries. However this trade war ends, it is shaping up to be far more impactful than the banana wars.

 

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