Since Donald Trump became president, the US and Chinese governments have been at loggerheads after the Trump administration started imposing hiked tariffs on goods coming from China. This came hot on the heels of a trade deal that the two governments had been negotiating on, a deal that was supposed to strengthen trade between the two global economic powerhouses. Hundreds of billions of dollars’ worth of Chinese goods are now being tariffed at 25%, up from 10%. China is threatening to come up with stringent countermeasures, which threatens to precipitate a full-blown trade war.
Trade experts are predicting that American companies that import goods from China will be paying unreasonably hefty taxes to their government by 2020. That could cripple their operations.
This trade tension has precipitated many harsh and far-reaching consequences. Manufacturers and importers in the US are now cutting costs, postponing key business deals, and putting off investments in a bid to cushion the business-crippling impact of the trade wars. Moody’s Analytics- an American economic research firm- estimates that this has already cost 300,000 Americans their jobs and if things don’t change for the better, more than 450,000 job opportunities will have been quashed by the end of 2019. This impact is being felt across industries, although some industries have been affected more than others. Here are some of these industries:
The Energy Sector
Steel and aluminum are very important to America’s energy sector. They are used to construct oil pipelines, to build solar panels, to distribute electric power- you name it! President Trump has proposed an additional tax on aluminum and steel imports from China, which has already caused the country’s energy PD to hike significantly. Projects in the energy sector will keep getting pricier, which in turn will force consumers to pay higher prices for clean energy. If the price gets out of hand, there is a serious danger of many Americans ditching the expensive clean energy for the cheaper dirty energy.
American automakers sell most of their products in the Chinese market. In 2018, as a countermeasure, the Chinese government raised tariffs from 15% to 40% for all automobiles entering its market from the US. This hasn’t affected the Chinese so much, bearing in mind that the Asian nation has a thriving automobile sector that can satisfy the local market.
On the other hand, American electric automakers including Tesla Inc. (TSLA) will be feeling the pinch in the long run if the China-US trade tension deteriorates. Auto parts sellers will also stand to lose if the situation won’t improve. That being said, things are looking up for this industry as the Chinese government promised to suspend the tariffs as an act of goodwill. If the US could return the gesture, fortunes are likely to turn in favor of American automakers.
Digital technology has allowed many American firms to expand their products and services in China. The Asian market helps companies from the west to generate a consistent growth rate of 4-5% per annum, sometimes more. That is why localization services have become very marketable in the recent past: If you want to expand in China, you should consider hiring professional translation services to handle all your localization projects, failure to which you could greatly hurt your chances of understanding or impressing your Chinese customers. But then with the growing trade tension, lesser companies will be keen to move to China in the future, which will mean lesser need for translation services. The translation industry in China could really suffer going forward.
Food and Agribusiness
The Chinese government cut off imports of corn, soybeans, nuts, lobster, and other farm products from the US. The American farmers are now struggling to find a market for their produce, which has, in turn, affected their productivity. Tractor manufacturers and farm input sellers are also feeling the pinch. Processed food companies in the US might be forced to lay off workers and close some of their processing plants if things remain as they are.
Most tech companies in the US have opened shops in China, some of them including NVIDIA Corp. (NVDA) and Intel Corp. (INTC). Chinese tech manufacturers, on the other hand, depend on American semiconductor suppliers to run their businesses. An escalation in the U.S.-China trade war could really hurt tech traders in both countries.
The tension between the U.S. and Chinese officials could end up hurting key industries in both economies. It could be a battle over who will control international trade, but it can easily boil over and become counterproductive. The sad thing is that no one really knows for sure if the tension will rage on or we still are going to witness more draconian tariffs. Only time will tell.