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The ongoing confrontation between the US and China regarding who is benefiting much from trade has attracted a global ire with many researchers cautioning of impending economic burst between the two leading global economies. US has been adamant that Beijing has been unfair and exploitative of the US market with billion worth exports that are devoid of taxes, tariffs and other regulatory mechanisms such as quotas. The eerie of recent events is a mirror image of the cold war tactics that different countries used to secure their superiority, hegemony and sovereignty.
US has underscored some of the confrontational areas that it views to have been violated beforehand by China. Nevertheless, China blindingly refutes such contentions on the account that Washington is trying to undermine the principles of free trade. A series of extortion from both sides has only exacerbated the scuffle in relation to who should define trade terms between the two countries. Subsequently, due to inexorable nature of the conflict, both sides are obdurate about their position and doing less to salvage and break the impasse over the US-China trade wars.
Among the key issues of consternation between the US and China include the violation of US-based companies’ property rights by China, hacking US companies and govern sensitive information, excessive state subsidies that aim at reducing foreign firms presence in China and the frequent production of substandard goods that are dumped in different countries. However, Beijing has been resolute to reiterate that US accusations are simply unsubstantiated and groundless while maintaining that China is upholding the WTO policies and principles throughout. Conversely, China reproaches US of unilaterally violating WTO principles.
US is demanding Beijing to make deliberate efforts in improving its market accessibility and protection of foreign firms’ intellectual property rights, especially for the US companies.
As a result of the unceasing trade wars and provocations between the two countries, Washington imposed $250 billion worth in tariffs on the Beijing imports with the aim of attaining concessions. Axiomatically, in a retaliatory move, Beijing imposed $110 billion on US goods
As the war trade continues and the second wave of tariffs on Beijing’s product placed on hold by the US, its effects and consequences have begun wrecking the US and Chinese companies. Businesses have continued to record low profits within the a few months after the implementation of the tariffs by the two countries. Massive job layoffs and transfer of production plants have also been witnessed in the recent past with firms trying to curtain on the adversative effects of the US-China war.
Firstly, companies and business are belligerent to find new markets for their products abroad. The lack of market caused by the tariff and quotas imposed by China and the US have deleterious effects on companies as they have limited access to their main consumers. consequently, due to the lack of access to the market, companies are recording losses and are laying off employees to maintain the situation without further loses that threatens their future sustainability.
Effects of US-China trade war on Ford Motors Company
Among the companies that were instantly affected by the US-china trade war is Ford Motors Company which reported a loss of $1 billion in revenue after Beijing responded to the US provocations with tariffs on US-based goods. In addition, due to the limitation on sales, Ford Motor company is contemplating on enormous layoffs that will help the company to cope up with the political tension between Beijing and Washington.
Astoundingly, the dwindling profits for US largest companies such as ford motors ins a clear signal of the vastness and cruelty with which the trade war is cripplingly shattering companies and the brawl to keep afloat. Massive losses in less than a year since the trade war begun can only depict of a brewing turmoil for companies in future lest the standoff between US and China is addressed substantively.
Impressively, the magnitude of the struggle that Ford Motors Company has in retaining its market is China is disquieting when you become cognizant of the fact that China is the largest automobile market in the world. Other automobile companies such as Volkswagen and even General Motors are making substantial profits from China as a true testimony of the negative effects on the US-China trade war on businesses and companies that have an origin in China or US.
Effects of US-China trade war Apple Inc.
Apple Inc. is the second company to be hit worse by the US-china trade war. On 3rd January 2018, Apple market share shade off substantially causing unease among stakeholders. Since October 2018, Apple Inc. has been trailing its market value worryingly. It is reported that it has lost over $350 billion. In a recent move, Apple Inc. has been crumbling shockingly with market capitalization of less than $1 trillion by Friday. By Friday, Apple’s share had fallen 7.1%. Apple Inc. has linked its poor performance on US-China trade war that has reduced its market share and ability to export more iPhones to the China. Habitually, China is the largest buyer of Apples’ phone in the entire world and such mixed signals can only be a source of mayhem ahead in 2019.
In fact, Apple has cut back on its profit and revenue projection in China by $9 billion citing economic and national boycott of its products due to US –chain tariffs that has led to the decline in demand for Apple’s products. The profit trepidation by Apple due to the shrinking of the Chinese market is an extension of the recent suit filed against it by Qualcomm which saw Apple banned from selling iPhone 6S through iPhone X in China .
Similarly, China has suffered as a result of the tailwinds implementation of the severest sweeping tax changes in 3 decades. Many companies have had to close down and peruse massive layoffs to cut on overheads and avoid overdependence on US by moving to other countries. Corporations such as Ren Jiding are looking for new markets instead of the US for them to remain competitive.
To recap, the Beijing and Washington trade war has grim implications on the performance of two leading economies and the sustainability of their economies. Both countries have already recorded a decline in imports/exports and a reduction in sales. China is reported to have surplus in production with no market for her products. Major corporations are struggling and learning to cope with tariffs from both countries and the only way out is to look for new markets in different countries where tax policies are favorable for their businesses.