eco

`The Controversial approval of tariffs on imported washing machines and
solar panels in the united states.

 

This is United States president Donald Trump’s first move
towards ‘AMERICA FIRST’ trade policy, which is brought about to protect the
local manufacturers from the International foreign competition. When he had
promised to protect the United states borders from the international
manufacturers for “Manufacturing our products, stealing our companies and destroying
our jobs” Donald trump has imposed tariffs on imported Solar Panels and Washing
machines from China. This is Trump’s first tariff order and the most
consequential trade action since he withdrew from the pacific trade deal and
began negotiations to over haul the North America free trade agreement.

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The move was in response to petitions from the United states
manufacturers (Whirlpool, Suniva and solar worlds America) i.e. US
washing machine & Solar panel manufactures, who have been complaining for
years that the rising imports, specifically from china have been eating up
their sales, owing to this Trump imposed a tariff of 30% in the first year, which
will gradually fall to 15% in the coming four years. But the duties on the
imported washing machine and its parts were as much as 20% on the first 1.2
million products and 50% above that number. The percentage will drop to 16%
& 40% $ by the third year.

 

Implications:

1.   
China.

The imposition of tariff on washing machines and solar
panels will directly affect China in a big way. Firstly, the United states
being such an enormous country, the imports from China will be in large number.
The application of tariff will drastically reduce China’s export to US. Because of
the reeducation of the Chinese export to the U.S. there will be a decline in
the inflow of dollar
in the country which will bring down the forex reserve of the country to quiet
an extend, owing to which the value of the Yuan will depreciate from 6.40/$ to
6.90/$ which will hurt the Chinese economy. The reeducation of exports which
also hurt the balance of trade of the country causing imbalances. The fall in
the demand from America for the washing machine and solar panels will result in
China having excess inventory which will be expensive to hold hence they resort
to dumping of the products in countries like India at/under cost of production
bringing in a lot of Indian rupee instead of dollar and the Indian rupee is
non-convertible in the foreign market. Because of the depreciation of the yuan
it becomes cheaper for other countries to import products from china,
benefiting them along way. The fall in the yuan mean that the price they pay
per barrel of oil will go up, Chine importers 11 billion barrels of oil/day and
Oil has big importance in Manufacturing sector (Transportation &
production) hence the cost of production will also go up hurting China’s
biggest stream of income.

 

 

 

 

 

 

 

2.     INDIA.

India has a population of 3.2
Billion people and hence becomes the obvious destination for China to Dump its
excess stock meant to be exported to the united states. This move in turn will
hurt the Indian local manufacturers as they won’t be able to compete with the
Chinese products as they will be selling them below cost of production which
will heavily hurt the local manufactures and supplier hurting the business of
many of them and causing some of them to even shut down owing to people losing
their job and causing unemployment among the small manufactures which is again,
is pressure on the Indian Government. Many of the unemployed then resort to
Crime and joining radical groups like the Naxalites which is a threat to the
country.

3.   
United
States of America.

 

The radical move of the United States, of imposing such heavy tariffs on
Chinese goods will naturally result in China retaliating, by imposing tariffs
on American Imports but, the fact of the matter is that China holds over 3.2 trillion
of united states $ in the federal reserve of which $1,700 billion is in the
form of United States Bonds. China being the extremist country that it is
highly capable and fighting back in a big way one of which could be selling off
its U.S. bonds which will have ENORMOUS repercussions on the united states
economy. How? When China sells such a large number of United states bonds it will cause the interest
rates of the American banks to go up. America being a debt economy, having 18
billion in debt in a 19 billion dollar GDP/year country, it will result in the
cost of living in the country to go up to a large extend forcing banks to
shrink its credit policy and reductions in credit facilities this will result
in the demand of goods and services reducing to big extend which initially will
mean that all the manufacturing/ service firms will first have to cut down on
production which will cause reeducation of its employees which again causes
unemployment in the country
and overtime will cause many of the companies and offices to shut down
causing large scale unemployment and recession in the market, due to the
non-performing assets of majority of the account holders will force many banks
to declare bankruptcy and shut down forcing the dollar to depreciate and
weakening the united states economy similar to the great depression of the
1930’s. the existing banks will again heavily rely on interbank borrowing to
meet its required liquidity which will cause the demand of inter bank credit
requirement to go up pushing the LIBOR to up to 200 basis points which is bad
for the global bank scenario. The rate of the United states dollar and the cost
per barrel of oil is inversely proportionate. The possible depression of the
dollar will cause the oil rate/ barrel to go up which will have its
repercussions worldwide.

 

4.   
UNITED ARAB
EMIRATES:

 

United Arab Emirates is the largest producer and
exporter of crude oil in the world, in the case that the Oil price rise will
prove higher demand for the oil and higher income for UAE. United Arab Emirates
has so much solar potential because of it Geo positioning hence would probably
take advance of the Trade war between U.S. and China and acquire all the solar
panels that were to be exported to US at dumping rates and be solar efficient.

 

To Conclude, it is seen that small geo political moves
have large ripple effects, some positive and some negative. Countries like
America must take into consideration all these factors when imposing such
drastic tariffs on China.

 

 

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