How Could Tariffs on China Impact Global Trade

China has one of the largest economies in the world. Over the past decade, the economic growth in China has been an enormous benefit for the global economy. Last year, the United States decided to impose tariffs on Chinese products. Many people were surprised by this decision.

Once the tariffs were put in place, imports from China decreased. Many American companies are investing in new production options within the United States. Some economists believe that the trade conflict could cause multiple issues in the coming years.

Labor Costs

One of the biggest reasons that American companies import products from China are labor costs. It is much more expensive to hire a worker in the United States than China. As a result, Chinese factories can produce products at a much lower cost than American factories.

With higher taxes on Chinese products, it is cheaper to produce some products in the United States than in China. To make things worse for the Chinese economy, labor costs in China are rising. Some companies are moving production to other nations in Asia. Countries like Vietnam and Thailand may notice an increase in economic growth due to the trade conflict.

Global Tensions

Another reason the trade dispute could impact the global economy is increased tensions between the United States and China. These two nations have the most powerful militaries in the world. If the trade dispute escalates, some people worry that additional taxes could be levied against both countries.

Planning for the Future

Multiple business leaders have commented that global tensions are causing supply chain problems. Business owners struggle to plan production without knowing the costs of importing from China or other nations.

American farmers have been hit especially hard in the trade conflict. China imposed higher duties on American crops last year. With lower demand for American crops, commodity prices dropped rapidly. Declining commodity prices are a significant issue for farmers. Although the government passed a bill to provide financial aid for American farmers, most farmers feel like the financial assistance is not enough.

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