Global Trade’s Shifting Tides This Holiday Season
The 2019 holiday season is upon us. Along with the family-bonding, delicious food, and gift-giving comes the busiest time of the year for international trade and commerce. However, the U.S.-China trade war may put a wrench in this season of giving. President Trump was ushered into the Oval Office on an aggressive platform of trade protectionism. President Trump lambasted China as a currency manipulator and an unethical trade partner—purposely causing trade imbalances, limiting American companies’ market access, and attempting to steal American technology. Now, the United States and China are entrenched in a hyper-aggressive trade war. President Trump claims that the trade war will not hurt American consumers and that the United States has the upper hand. In reality, the trade war is opening new markets for other countries and effectively squeezing the United States and China out of important markets. In the midst of U.S.-China aggression, a space has opened and other countries are stepping up to fill the void. Developing countries throughout the Global South have an incredible opportunity to benefit from this diversion in trade flows and sell their goods to new and desperate markets.
The United States and China are heavily dependent on each other’s economies. China is an export-led economy and the United States is their largest customer. In turn, the United States relies on China to supply them with low-cost goods and bolster U.S. exports. The trade war obstructs this symbiotic relationship and damages a multitude of industries within both countries. Other countries are filling the void created by the trade war and building beneficial relationships with these two behemoths.
One prime example is the cranberry industry. The global demand for cranberries has soured in recent years, leaving American cranberry farmers with a huge surplus in a shrinking market. Ocean Spray and other leading cranberry producers launched a massive marketing campaign into China introducing the fruit to Chinese consumers for the very first time. As a result between 2013 and 2018, cranberry sales to China increased by an astounding 1000%, reaching $55 million in 2018. However, the U.S.-China trade war increased tariffs on cranberries from 15% to 40% resulting in a 45% decline in sales in 2019. In addition, the European Union, Mexico, and Canada placed their own tariffs on the holiday staple in retaliation to President Trump’s aggressive trade tactics. While American cranberry farmers see sales falter, Chilean and Canadian growers are seizing the newfound opportunity. Chile and Canada, two other major cranberry-producing countries, have seen their exports to China increase by 368% and 710%, respectively, in the last year alone. American firms created an amazingly ripe cranberry market in China, but the trade war has meant that other countries are feasting on the spoils.
This trend is occurring in other industries as well. China is reeling from a pork shortage as they grapple with the fallout of a Swine virus that killed millions of pigs. Due to the trade war, American producers have largely missed out on the prospective pork boom as the EU and Brazil have increased their pork exports. Likewise, soybeans, America’s largest export to China, have become too expensive due to tariffs and China is now buying soybeans from Brazil and Argentina. As tariffs rise and goods become more expensive, importers in the United States and China have begun sourcing products from cheaper, alternative sources. In addition, new tariffs are set to debut on December 15th, primarily targeting Chinese imports such as laptops, toys, and electronics. This is a disastrous time for an escalation to the trade war as the world gets ready to celebrate the holiday season. When Americans go on their shopping sprees, they will quickly notice the rising costs as the trade war directly impacts the pockets of American consumers.
If trade between these countries persists, China and the United States will start to grow dependent and realize that they are receiving the same quality goods at a consistently lower price. Countries that would never have become major trading partners with the United States or China are now seeing their gross domestic product (GDP) skyrocket. Vietnam, for example, has seen a 7.9% growth in GDP as Chinese firms outsource to the South and the U.S. purchases more Vietnamese exports such as phone parts and furniture. In addition to Vietnam, the other major beneficiaries of the trade war are Taiwan, Malaysia, and Mexico as China and the United States vie for their goods.
President Trump’s trade war has uprooted global trade trends. Astute countries have recognized the opportunities the trade war has created and swooped in to substitute affected markets. Some countries hope the trade war lasts forever as some they are witnessing transformations to their economies. The trade war has empowered a multitude of countries and foreign markets other than the United States. This is far from the ‘America First’ policies Trump claims to be pursuing. The current state of global trade is clearly showing that the loser of this trade war is the United States and China and the winners are the developing countries. Once the trade war has ended, the new trade partnerships formed will endure.