Memorandum

In August China threatened tariffs of up to 25% on $60 billion of U.S. goods, in retaliation for the Trump administration’s latest threat of 25% tariffs on $200 billion of Chinese goods. That was more than double earlier proposals of 10%. That escalation is likely to continue into September, when those tariffs are supposed to go into effect.

 

President Donald Trump is betting Beijing will blink first in the showdown over tariffs. Such an outcome is far from assured — and it could also take a while.

 

Economists see a risk that the world is headed toward an all-out trade war, one the World Trade Organization may be ill-equipped to respond to.

 

Picking a fight with a trading partner seems like a bad idea, but it’s not necessarily irrational. Probing a partner’s weaknesses can be an effective way to get a better trade deal, according to game theory, the branch of mathematics that deals with strategy.

 

The escalating trade battle between the U.S. and the rest of the world is raising the risk of a meaningful slowing in an otherwise vibrant American economy.

 

Americans will pay more for everything from big-screen TVs to school supplies if the Trump administration follows through on threats to slap tariffs on Chinese imports, U.S. retailers warned.

 

Xi Jinping vowed to match Donald Trump blow for blow in any trade war. Now as one gets closer, some in Beijing are starting to openly wonder whether China is ready for the fight — an unusually direct challenge to the leadership of the world’s second-largest economy.

 

China has used its currency in the past to soften the blow from unfavorable developments—until the rest of the world protests. China-watchers say that this time, the decline in the yuan, down 7% against the dollar in two months, was probably a reaction to market forces, such as a stronger dollar and a weaker Chinese economy. But there’s no question a weaker yuan blunts the impact of tariffs—exporters usually benefit from a weaker currency, since it makes their products cheaper to buy. On Friday, China’s central bank took steps to rein in the yuan’s devaluation and pledged to keep it largely stable, though the yuan right now is at its lowest point in more than a year.

 

China has been trying to reduce its debt across the board, including cleaning up its state-owned enterprises and shadow banking system. Now, though, strategists are speculating that China will try to stimulate its economy by increasing credit to small businesses and service-oriented companies. That’s worrisome for investors who have long been wary about China’s debt.

 

Directions:

 

The memorandum must be written to President Trump or Xi Jinping President of the Peoples Republic of China and General Secretary of the Communist Party.  You should propose a specific next step for either Trump or Jinping that you believe would result in a new agreement that would benefit either the U.S. or China.  This could include a new tariff or quota, a proposed trade agreement that resolves specific issues, or another policy such as an economic sanction.  You CANNOT propose a new round of discussions unless you have a specific proposal attached to those discussions.

 

Your decision memo must include a pros and cons of the approach you recommend.  Pros and cons should be political, policy, economic (what impact on business or individuals for example), capacity (the ability of government or another entity to meet the goal), national security, and budgetary (if applicable)

The decision memo is to be no longer than 5 pages, single spaced.  Students should use the Calibri font size 11.  All papers must include footnotes, not endnotes. Please follow the Chicago Manual of Style regarding footnotes and grammar.

 

 

Sample Solution

 

 

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