Wednesday, June 05, 2019
The global trade war initiated by the United States has become increasingly heated. To this day, the U.S.-China trade disputes has yet to be resolved, and it is clear that things have been taken up a notch to a more intense. Trade negotiations between the United States and the European Union, as well as those between the United States and Japan are still brewing, and their prospects does not appear to be optimistic. At this time, the United States shifted its tariff focus to Mexico, and India might become the next victim of the U.S. trade policy. As a huge beneficiary of the benefits of globalization, the United States is contradicting itself by breaking the world's economic structure established by itself in the form of trade war.

After the Second World War, economic globalization has undergone rapid development. The United States, taking the role of the lead country, took the initiative to establish multilateral international economic organizations such as the World Bank, the International Monetary Fund, and the World Trade Organization (WTO) in order to support its efforts to build a post-war economic order. Through these multilateral organizations, the United States established rules to promote world trade and financial liberalization, thereby promoting global economic liberalization. This not only allowed more countries to participate in the process of globalization, but also enjoys its subsequent benefits. The United States has become one of the biggest beneficiaries of globalization.

It is worth noting that most of globalization that took place after World War II was mainly based on global production. Taking multinational corporations as an example, these enterprises realized that an optimal allocation of resources was achievable through global production, and subsequently worked to maximize these benefits. This is especially represented in many German corporations. Since joining the WTO, China has also joined the world's division of labor, participating in global production in accordance with its comparative advantages, and becoming a world factory in the midst. The production-oriented countries participated in globalization have in the process gained considerable benefits. However, this globalization has led to a rise in global overproduction. In a society where overproduction is rampant, the competitiveness of American companies has declined, especially in some manufacturing industries like steel and automobiles. In order to safeguard the interests of these industries, the U.S. adopted the "America First" slogan and initiated the world into entering a global trade war.

The main reason why the United States dares to initiated the trade war is because the world has now entered the buyer's market, and as the world's largest buyer, the United States has a greater voice. But any trade war successfully provoked by the United States will also damage key countries that have joined globalization efforts through production methods, such as China and Germany. And in order to safeguard their own interests, these countries will take appropriate countermeasures. As a result, this will affect the world's economic structure that was formed after the Second World War.

Anbound researchers believe that the long-term trade war will change the global economic structure. The United States, China and the EU have mutual structural contradictions, and are likely to become the three "cores" of the future economic structure. Competing games will bring mutual harm. Countries with insufficient economic strength will be forced to "choose sides " in the economy, picking between the United States, Europe and China. Even Japan and South Korea will have to do this. Although Japan is the third largest economy in the world, it's economy only works well when "attached" to a big country due to its economic structure and demand for overseas markets. This is especially true for economically weaker South Korea. If there is an economic war between China and the United States, South Korea and countries that have close relations with the U.S. or China will also have their economies hit hard.

Anbound researchers also want to emphasize that the key to triggering a global trade war is global overproduction, which is also a fundamental point towards understanding the structural changes in the global economy. The occurrence and continuation of global overproduction, as well as its profound impact and shock on the society of many countries should be solved in a rational way. If the United States model is implemented, and high tariffs to shut out other countries' products, further deterioration will occur and there will be increasingly serious divisions and confrontations in the global situation. Completely obliteration of the beneficial global structure that was put in place post-Second World War is entirely possible. As Anbound proposed earlier the so-called "1+3" situation is a conclusion based on the analysis of the world's situation. The choices that some countries have to make regarding globalization and trade is not just a matter of choosing which side they will be on, but also taking into account the fragmentation caused by structural changes in the world. It should be pointed out that the profound division taking place in the world's structure is caused by certain extreme policies introduced by the United States.

Final analysis conclusion:

A long-term trade conflict will undoubtedly change the existing global economic structure. China should choose a rational way to establish the "1+3" structure and safeguard its own interests.
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Publication Date:November 2017

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