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Causes and effects of trade wars Winners and losers
The China – US currency war and the mutual depreciation of their currencies, the USD and the yuan, could provoke a rise in the value of the Euro, lower the competitiveness of its industrial exports, posing the risk of an open war on import – export sector of automobiles and agri-food products, increasing the risk of recessionist tendencies.
Prof. Dr. Adrian CIVICI
Dean, Faculty of Economic Sciences MEDITERRANEAN UNIVERSITY OF ALBANIA, UMSH
I
n March 2018, just ten years after the outbreak of the global financial crisis, Mr. Donald Trump, the US President, said: "trade wars are good and easy to win." It was about the commencement of a major US – China trade conflict, which would gradually engulf states and even continents, with the most unpredictable effects and consequences. "When two elephants fight in the savannah, they are likely to be injured, but one thing is certain: it is the grass in the field that suffers most." In a globalized world economy, the trade war between the world's two major powers threatens to produce great risks to other, developed, or developing countries. All the world's economic growth is threatened by the US – China trade war. For the
world trade, such a situation had not been seen since the 1930s, in the context of effects produced by the "Great Depression". For President Trump, "resentment" with China had begun since 2016, during the election campaign, when China was accused of “raping” the US and that it was "the greatest theft in the history of the world". The largest exporting power of the planet, since 2009, and then the first place in the world economy in 2014 had to face the famous slogan: "Make America
The trade war was also extended to monetary policy and exchange rates. In response to the "American attack" on Chinese exports, Beijing depreciated its yuan against dollar at a lower rate than in 2008, despite risks and losses, such an action posed to attract foreign investments and capital flows into the Chinese economy.
Great Again"; some US$ 558 billion of Chinese exports to the U.S. in 2018, in front of US$ 178 billion of US exports, with a trade deficit of US$ 380 billion. The US administration thought that China
was "breaking the rules", by putting itself on a mission of "restoring trade balance" between the two biggest superpowers on the planet, thus "giving a lecture to Beijing." But what the “Chinese exaggeration" was all about? In the WTO context, but also in the frame of bilateral relations between US, or EU, China has often been accused of "having a very specific, personal concept of a market economy" for "mass subsidy practices for business and corporations, by guaranteeing them significant portions of public markets," "evident dumping practices," "the obligation imposed on foreign companies investing in China to donate their technologies to China," "non-transparent policies with trademarks and patents, especially in the field of high-tech,” “for purchasing foreign corporates through state funds, in order to dominate and control the market”, etc. The US response is a direct "iron hand" confrontation against Beijing, with the logic that "we will tax them more and more until they behave correctly." The "war" began with a 25% increase in the tax on steel imports and 10% on imports of aluminum. Mr.Trump said "over 1,300 Chinese products will be taxed." Beijing responded immediately with a list of 128 U.S. products that would be taxed at 15-25%. That's how it started. Tax, and counter taxes, and vice versa ...! By August 2019, the value of the taxation of Chinese January 2020
Bankieri
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