e Economic War Between America and China: Is it Leading to a Global Depression?
Introduction
The economic war between the United States and China is a complex and multifaceted phenomenon, extending beyond mere trade disputes to encompass a broader struggle for global influence and dominance. This war, which took on new dimensions during the administration of former US President Donald Trump, has raised widespread concerns among investors and consumers, creating a state of uncertainty and anticipation in global markets. Did Trump succeed in this war? What are its potential repercussions on the global economy, and could it lead to a global depression?
Economic Depression and Recession: Is History Repeating Itself?
To understand the potential repercussions of the economic war, it is essential to distinguish between economic depression and recession, both of which are natural parts of the economic cycle. Governments often take corrective measures to counter economic collapses, as happened during the Great Depression and the collapse of stock, real estate, and banking markets.
Definition of Economic Depression and Recession
•Depression: A severe and sustained decline in economic activity, encompassing several sectors and markets, and lasting for many years. A depression is characterized by the severity and depth of its impact, leading to a general economic collapse.
•Recession: A downturn in economic growth for a specific region, market, or activity, usually lasting from several months to a year. The impact of a recession is moderate to medium, leading to a decline in growth and an increase in unemployment rates.
Difference Between Economic Depression and Recession
Feature Depression Recession
Duration Extends for several years Usually from several months to a year
Severity Severe and deep Moderate to medium
Impact General economic collapse Decline in growth and rising unemployment
Causes of Economic Depression and Recession
Various factors can lead to an economic depression or recession, including:
•Political Crises and Wars: Geopolitical conflicts directly affect economic stability.
•Natural Disasters and Pandemics: Can disrupt supply chains and affect production and consumption.
•Weak Purchasing Power: Results from consumer fears of job loss, increased taxes, or deteriorating quality of services and products.
•Erroneous Economic Policies and Measures: Ill-considered decisions in fiscal and monetary policies.
•Rising Interest Rates: Negatively impacts borrowing and investment.
•Lack of Data and Information Updates: Failure to keep pace with demographic and economic changes.
•Slowness in Problem Solving: Failure to address issues such as inflation and unemployment in a timely manner.
•Global Competition: The pursuit of producing higher quality goods at lower costs.
•Product Restrictions: Prohibiting the use of certain products or materials for health or environmental reasons.
Did Trump Succeed in the Economic War on China? Results and Victims
Many believe that the economic war between America and China was merely a personal vendetta by Trump, but the truth is that it is a struggle between two entities for global influence and dominance. This war was not only economic but also included media, military, and intelligence dimensions. What Trump did was unprecedented, as he targeted the most important players: investors.
Investor Shock and China's Reaction
Investors were shocked by China's reaction, which was described as irrational, such as media campaigns against international brands in response to American tariffs. China was supposed to use a tit-for-tat policy, but its reaction caused consumer anger and a feeling of deception, in addition to a decline in stock prices and disruption in global markets. This negatively affected the confidence level of current and future investors, as risks increase amid conflicts, leading to rising interest rates and the search for safer alternatives.
Other Aspects of the Economic War
Despite China's prepared infrastructure for high-quality production at a lower cost, in addition to integrated industrial zones, some countries may not give importance to aspects such as employee systems and rights. This significantly affects the willingness of consumers and investors to buy and deal with those countries. There have been appeals from employees regarding inhumane working conditions, which was one of the entry points for the war on China.
Furthermore, during its war with America, China attempted, through media attacks on international brands, to target other markets such as South America and Africa to compensate for European and American investments. However, China may face problems with these markets, as its economy may be negatively affected for several reasons, the most important of which is that these countries suffer from corruption and a lack of information systems and standardized quality criteria for purchasing products. In addition, investors may request lower quality standards to reduce costs, leading to random purchasing that does not match demand, causing large quantities of products to accumulate. Another reason may be that many countries are trying to protect their local industries and preserve jobs for their citizens.
Results and Victims of the Economic War
The economic war has caused many negative consequences and claimed multiple victims, including:
•Consumers: Affected by rising prices and lack of alternatives.
•Investors: Face financial losses and market instability.
•Supply, Transport, and Delivery Companies: Supply chains and logistics are affected.
•Banks: Affected by liquidity and rising interest rates.
•Countries and Water/Land Crossings: Affected by revenues from fees and taxes.
Key Results:
•Market Instability: Sharp fluctuations in stock and commodity markets.
•Rising Interest Rates: Due to depositors withdrawing funds and bondholders selling their bonds, reducing liquidity and limiting the ability of investors and individuals to borrow.
•Accumulation of Goods in Ports: Leads to additional costs and suspension of production orders, causing a shortage of goods in the market and an inability to meet demand.
•Rising Prices and Decreased Alternatives for Competing Products and Services: Affects consumer purchasing power.
•Unemployment and Investor Losses: Due to declining economic activity.
•Political and Border Wars and Skirmishes: Some countries, in situations of economic crises, labor unrest, and unemployment, resort to fabricating external political and security problems to cover up their failure to find radical solutions to economic and social problems.
•Political Alliances Between Countries: Driven by the desire to obtain economic or technical assistance or political support, or to shift battles to other regions to distract the opponent.
Tips for Facing Economic Challenges
To face economic challenges and mitigate their negative effects, the following tips can be followed:
•Corrective Economic Measures: Such as lowering interest rates, increasing liquidity, reducing taxes and fees, and combating inflation.
•Balanced International Policies: Adopting foreign policies that balance national interests with international relations.
•Transparency and Disclosure: Providing transparent and clear databases on production, investment, and related matters.
•Production Flexibility: The ability to adjust or change production lines, employ multi-skilled labor (general education in addition to a specific specialization), and use multi-tasking or adjustable machinery and equipment to perform other tasks.
•Understanding the Root Causes of the Problem: Focusing on the root causes of economic problems rather than superficial, incidental causes. For example, a high interest rate in a country may not be a purely economic problem, but rather a result of security instability in that country. Security, foreign policies, corruption, rumors, wars, and other factors affect interest rates, which directly impact the economy.
•Access to Data and Information: Providing continuously updated data and information, ensuring its independence, credibility, and diversity of sources.
•Global Quality Standards: Any producing country must adhere to global quality standards for production, and investors have the right to request modifications to products within quality and standard limits.
•International Cooperation: No country or company can produce and sell in isolation from other countries, as there are market shares for each country.
•Consideration of Humanitarian Issues: Regardless of disputes between countries, humanitarian issues and global security and safety must be considered, such as combating drug and human trafficking.
•Investor Awareness: Investors from third-world countries or non-producing countries or traders must have sufficient information about production, quality, and demand to avoid fraud or legal accountability.
•Taking Necessary Precautions: Such as insurance, joining specialized and reliable organizations, or through electronic inventory management.
•Protection of Intellectual Property Rights: Protecting innovations and creations.
•Humane Working Environments: Providing safety and security systems and humane working environments for employees.
•Internal Political Reforms: Combating corruption and achieving internal political stability.
Conclusion
The economic war between America and China demonstrates the interconnectedness of the global economy and its susceptibility to geopolitical conflicts. Although Trump may have directly instigated this war, it reflects a deeper struggle for influence. Understanding the causes and repercussions of these conflicts, taking appropriate corrective measures, and adopting balanced policies are crucial to avoiding a global depression and ensuring global economic stability.
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