MACRO- AND MICROECONOMICS - An Analysis Paper - The US-China Trade War (Essay Sample)

The US-China Trade War
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The US-China Trade War
Problem Faced
The main issues that have come to light include the US-China trade war, immigration laws, the US national debt, and foreign relations policy. The United States and China have a long history of trade conflicts, but recent events have been chiefly owing to sanctions imposed on China by the United States. Recently, the United States imposed taxes on 40% of Chinese goods, causing prices of US goods to skyrocket as inexpensive imports from China were halted. The United States has also blocked cheap steel imports, and as a response, the Chinese government has slapped significant tariffs on US goods. As a result, China has devalued its currency to make its commodities appear cheaper and more appealing, and it has begun selling items in emerging nations. However, US goods have gotten more expensive, and as a result, sales have plummeted. The Chinese government has escalated the trade war by implementing more tariffs. However, such issues will be handled before the G20 summit in 2018. Since China applied tariffs, there has been a lack of Chinese employees and visas in the United States, nullifying the clear winner. Because of the trade war, India has been the most significant benefit of exporting steel and aluminum to US markets because of the trade war.[Guoyong Liang and Haoyuan Ding, "The China-US trade war," The China-US Trade War, 2020, 64, doi: 10.4324/9780429345241-5.] [Liang and Ding, “The China-US trade war," 65.] [ Swati Singh and Sachin Sisodiya, "US–China trade war," The China–US Trade War and South Asian Economies, 2021, 201, doi:10.4324/9781003053613-15.]
Consequences and Actions Taken
Last year's spike in inflation was expected due to increasing crude oil costs and increased demand and spending, which pushed CPI inflation to 2.3 percent. In 2019, unemployment had remained in the 3.93 percent to 3.78 percent range. It had progressively declined due to increasing capital spending by corporations following significant tax cuts, which prompted headroom inflation to rocket and shoot. As of the end of 2019, the fed funds rate was 1.7 percent, 10-year treasury yields were 1.8 percent, and 30-year treasury yields were 2.07 percent. The expectation of a recession worsens the changes, so returns are higher in the short run as risk is higher, and the economy seeks to recover after ten years, causing yields to fall for ten and thirty years. The yield curve has been inverted, which is a strong signal of a near-term recession since 5-year treasury yields are higher than 10 years and 30-year yields, indicating that the long-term outlook is steady, but the short-term outlook indicates a downturn.[ Axel Rey, The China Sinkhole (Book 1): Increasing systemic fragility underneath China's debt-laden economy, expedited by the US-China trade war (New York: Global Era Public Interest Info Network, 2019).] [Max L. Wiegand, The Stock Market Reaction to Presidential Tweets in the Case of the US-China Trade War: An Empirical Case Study (Munich: Grin Verlag, 2020).] [Swati Singh and Sachin Sisodiya, "US–China trade war," The China–US Trade War and South Asian Economies, 2021, 201, doi:10.4324/9781003053613-15.]
Federal funds rates remain steady in anticipation of preventing more inflation and, at the same time, balancing the counter-effects of the trade war. A rise in funds rates can cause a faster slowdown, while a decrease in rates can increase inflation levels, so the Fed maintains a neutral stance. “The US Fed's primary concern at the moment is to monitor inflation, as unemployment is projected to be 3.5 percent.” However, the negative implications of the US-China trade war and global uncertainty make the Fed dovish, while spiking inflation causes it to be hawkish, putting it in a catch-22 situation. The Fed must monitor and react next month, looking to maintain interest rates constant and analyzing the aftermath as the US-China trade war has deescalated, as has the US-Iraq conflict and sanctions on Iran, and mus