Efekti trgovinskog rata na Evropu
EFFECTS OF THE TRADE WAR ON EUROPE

Author(s): Sanja M. Filipović
Subject(s): Economy, National Economy, Supranational / Global Economy, Socio-Economic Research
Published by: Институт друштвених наука
Keywords: macroeconomics; trade; international finance; United States; China; European Union
Summary/Abstract: Economic cooperation between China and the United States largely determines the global economic balance and financial flows. Although the mutual cooperation between the two countries has brought multiple benefits, in the last few years the US has begun to accuse China of defrauding the national currency which has caused a growing trade commodity deficit in the US. These charges were also the motive for the US to impose tariffs on Chinese goods in 2018. The aim of this paper is, based on the analysis of mutual trade relations between these two largest world economies, to determine the causes of the US trade deficit and point to the consequences of the trade war on European countries. The results of the research showed that: a) the current account balance of the state determines the relationship between savings and investments; b) the trade deficit is a reflection of the complementarity and comparative strengths of the Chinese and US industries; and c) trade relations are the result of the international division of labor and change of production locations by multinational companies. Data on the value of trade deficits widely vary depending on the source, and one of the reasons may be different accounting approaches. If the calculation is based on the added value, the deficit would be significantly reduced because Chinese foreign trade is characterized by large imports and exports of processed goods. In addition, research has shown that there is a noticeable trend of shifting Chinese investments towards developing and European countries. Yet, compared to global Chinese investment, investment in European countries is still modest.

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