Trade Conflicts Case Analysis

  • Uncategorized

TradeConflicts Case Analysis

Author’sname

TradeConflicts Case Analysis

TheUnited States holds that the intervention by the Chinese governmenton currency has adversely affected its economy. In one way, theUnited States may be right to defend the claim, as mentioned above.The case analysis tries to shed light on the claim.

Argument

TheChinese government, through the People’s Bank of China, may decideto flood the market with the Chinese Yuan and buy the U.S. dollar. Asa result, the supply of the U.S. dollar in the market declines,making China’s imports from the U.S. expensive. The U.S. economywill be hurt because Chinese consumers will prefer the affordablehomemade goods rather than the expensive U.S. exports[ CITATION Mad16 l 1033 ].Consequently, the U.S. manufacturing and production companies wouldlose a potential market. Further, the U.S. companies would try toslash down production expenses through retrenchments and otherpractices that adversely affect the workforce and the economy ingeneral. As a result, unemployment rises while the economy declines.

Onthe contrary, the U.S. government can intervene on the situation byevaluating its social and economic policies. Researchers andeconomists would argue that the U.S. economy is not pegged on theChinese monetary policies[ CITATION Mad16 l 1033 ].For instance, the U.S. could review some of its education, monetary,and fiscal policies to offer a global competition. The governmentcould implement education reforms that would ensure students utilizetheir technical skills in the economy, rather than wait for whitecollar jobs.

Conclusion

Inconclusion, the both countries may resolve the above trade conflictsby allowing the market forces to control the currencies. As such, nocountry would feel sidelined by the monetary and fiscal interventionpractices. The market forces will dictate the demand and supply ofthe currencies thus ensuring free and fair trade.

Reference

Madura,J. (2016). InternationalFinancial Management.Boston: Cengage Learning.