The US-China trade war has been escalating for some time now, especially after the Covid-19 pandemic. More companies are planning to diversify their supply chain after the Covid-19 pandemic crippled their business. Also, it’s getting too bureaucratic to be a foreigner in China and hence companies are looking to move to other countries in Asia and South America.
A lot of people think that Covid-19 is one more nail in the coffin for the eventual pullback from China. Intellectual theft, growing economic clout of a Communist country, bullying Hong Kong, Taiwan and other neighboring countries were all concerns which corporate greed helped to overlook.
Having said that, the global supply chain of big companies with most of the manufacturing in China cannot be replaced overnight. Other alternatives will be expensive, may not be scalable or the locations will not have business-focused government.
So, maybe, some manufacturing capacity will move to cheaper locations, but most will continue to be in China. There could be some noise around this, but nothing drastic may happen within the next year or so, and maybe things will turn normal, like before.
US-China: The Biggest Trade Conflict
The US-China trade war is the biggest trade conflict right now that threatens to affect the economic forecast of other countries as well.
For a long time, the US has been accusing China of resorting to unfair trading practices and intellectual property theft. China, on the other hand feels that us is trying to curb its growth as a global economic power. Unfortunately, negotiations between the two countries have not been successful.
The United States, which used to be the most active participant in the World Trade Organization (WTO), now feels that the WTO is incapable of resolving its trade issues with China and has been looking at ways to sidestep the WTO system to effectively deal with China.
While the former US President Donald Trump felt that Trade Wars are good and easy to win, the fact is that the US-china trade war has significantly hurt the American economy (Deaux et al., 2018).
There is no doubt that China is the world’s largest market for several products and services. So, despite what the US President claims, American businesses will be at a disadvantage because they will be increasingly shut out of the Chinese market that has over 1 billion consumers.
Both US and china are trying to decouple from each other which is obviously hurting them, but if other countries were also to take a similar approach, the costs of such moves for other nations can be high (Etzioni, 2020).
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