The Story
Let me bring you up to speed on the trade war so far.
Trump, unhappy with the US’s trading relationship with China, decided to impose a series of tariffs on an increasing number of Chinese imports. In turn, China has responded with its own set of retaliatory tariffs. This tit-for-tat escalation of tariffs is what we call a trade war.
China has long been criticised for unfair market practices, including forcing the transfer of technology from US to Chinese companies, stealing intellectual property and restricting access to its market.
Along with Trump’s concerns over the US-China trade deficit (the fact that the US imports from China far more than it exports to China), these are the ‘official reasons’ for the imposition of tariffs. However, it’s worth remembering that China is a threat to the US’s dominance on the world stage, especially in a future world of high tech and AI. There is every incentive to stem the growth of the world’s second-largest economy.
Impact on Businesses and Law firms
It’s hard to measure the cost of the trade war. That’s because it’s not just the cost of additional taxes being paid by businesses when bringing goods into a country, it’s also the cost of uncertainty. Businesses and investors don’t know whether the future will lead to a further escalation of tariffs or a trade truce, which makes it very hard to make long-term investment decisions.
What we do know is the trade war has led to weaker global growth forecasts, tech companies scrambling to reconsider supply chains, contractions in a variety of exports to China, lower US interest rates, and much more.
Maybe it’s worth it? You might argue that the short-term cost doesn’t matter, that this is a price worth paying if it leads to a China with reformed trade practices and greater market access.
Whatever the case, clients will rely on commercial lawyers to evaluate their existing contracts, draft contingency terms into new contracts and evaluate their options for the future. In times of uncertainty, high-quality legal advice may be the only constant.
By Jaysen
