How Effective are Economic Tariffs and Sanctions when Negotiating International Trade Deals?

Written by: Cash101 Staff
10/14/2019

economic-markets

There are always debates about whether economic sanctions are an appropriate tool to utilize when negotiating international trade deals with other countries. There are historical precedents that have shown a collection of mixed results, but sanctions might not always be the appropriate solution when trying to get the best deal possible. Sanctions can lead to potential trade wars and anger other countries and potentially sour the relationship.

Every country is always looking for leverage when negotiating trade deals, but sometimes sanctions are forcibly used to strike fear at the negotiating table. An excellent example of these types of tactics can be seen between the United States and China during their on-going trade war with economic sanctions.

China has seen a steadily decreasing growth within its economy as a result of the American sanctions, but they have been stalling to make a deal with the United States, particularly as Trump faces other foreign issues within his administration.

The United States could probably outlast the Chinese when it comes to an economic trade war that is based around sanctions, but at some point, the troublesome tariffs might catch up with them on a different front that could raise prices in various national departments.

President Trump has often been accused of abusing his ability to push sanctions against international countries, but some experts believe that he is managing to set new precedents and examples that are helping the United States take in more money. There could be economic setbacks in the future if a trade deal is not reached, but at least for now, the sanctions appear to be working in favor of the United States.

China is scheduled to pursue the negotiation of a trade deal in the closing months of 2019, but if the previous quarters of this year are any indication, it could be a prolonged and tedious process with several bumps along the way.

Economic Sanctions

Economic sanctions can be perceived in several different ways. Some countries find great benefits from utilizing the effects of economic sanctions, while other countries see the sanctions as a threat of war. Retaliation is a common aspect that has to be considered when placing economic sanctions into effect.

The new tug of war between China and the United States is an excellent example of the positive and negative effects of economic sanctions. The United States seems to be reaping some of those positive benefits, but China’s patience is thin, and there could be a collision course that both countries find themselves on when ultimately negotiating a trade deal.

As we had mentioned previously, retaliation has already been seen from both parties during the ongoing negotiation process. Billions of dollars could be influenced by retaliatory sanctions that are continually going into effect to respond to other tariffs. This ongoing process can get very messy and ultimately sour the mood at the negotiating table.

At the very least, sanctions are a way of pressuring countries into taking actions that they wouldn’t regularly want to take. For example, the United States used tariffs and sanctions against China to pressure them into making a favorable trade deal to the United States. This effort has seemingly had several positive effects for the United States, all while the Chinese economy has deteriorated to a grinding halt.

It is difficult to predict the upcoming negotiation between China and the U.S., but there could be more economic fireworks if either party doesn’t get what they are looking for at the negotiating table.

Conclusion

Now that we have taken a look at the competitive trade war between China and the United States, what warning signs should investors look at before investing in the stock market?

The economic markets are extremely volatile to trade deal headlines that become available on a weekly basis. Fear is one of the most common emotions that investors can utilize to influence the markets. When negotiations aren’t going as planned, a sense of urgency and panic can be felt like a vicious presence.

There are several debates between economic experts that challenge the possibility of the President utilizing additional tariffs to the advantage of the United States. Some people believe that Trump has exhausted his options and will back off in order to finally make a deal with China, prior to the 2020 election.

From the alternative perspective, others believe that China could be hoping for Trump to lose his re-election so that a new President can come into the office and place a lesser priority on addressing Chinese economic tactics.

While the world might be focused on the ongoing trade war between these two international superpowers, other countries might be learning for themselves how to negotiate better economic deals by utilizing economic tariffs and sanctions as a threat. The upcoming months will surely be exciting within the economic world as the pressure of the 2020 U.S. election continues to make its presence felt.


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