Despite the fact that international trade is more streamlined and interconnected than ever before, there are still a number of issues prevalent in the industry right now. These issues are creating problems and making things more difficult for supply chains around the world to function at optimal levels. Here is a look at three of the most important issues that are affecting global trade right now.

1. Rising tariffs

As the world’s largest economy, the United States has a lot of economic power and influence. However, under President Trump, the United States has decided to engage in a series of trade wars, using tariffs as its main weapon. Throughout his campaign, Donald Trump repeatedly stated that he believed that the United States was suffering from a series of bad trade deals and currency manipulation tactics from nations such as China.

Once he got into office, President Trump started imposing several different tariffs on imported goods. He justified them as an attempt to make trade conditions more favorable for the United States.  In the past two years, Trump has put 10-25 % tariffs on hundreds of billions of dollars’ worth of Chinese goods. These goods include solar panels, steel, aluminum, and many others.

In response to these tariffs, China has also put tariffs on hundreds of billions of dollars’ worth of American imports. Currently, the United States has more tariffs on Chinese goods than China has on U.S. goods. However, this tit-for-tat trade war seems to have no end in sight. Now China has put a ban on buying U.S. agricultural products and has also devalued its currency as a further attempt to win the trade war with the United States.

This protracted trade war is disrupting the free flow of trade between the world’s two largest economies. This trade war and its consequences will be felt around the world for some time to come. The levels of trade that exist between the two nations will impact many other countries.

2. Intellectual property theft and counterfeiting

This issue also is primarily between China and the United States. President Trump has accused the Chinese of participating in rampant intellectual property theft via cyberattacks and forced technology transfers. Many different parties have accused the Chinese of counterfeiting numerous brands and products.

The continuous theft of intellectual property by Chinese companies is a very serious issue. Even China’s President Xi Jinping has spoken out against it and expressed his belief that stronger punishments for infringement and violators are needed. The Federal Reserve Bank of Minneapolis conducted a study in 2015 that determined that roughly half of all of the technology owned by Chinese companies was obtained by foreign companies.

IP theft is a major global trade issue because companies are unlawfully profiting from breakthroughs made by other companies. The incentive for business to innovate reduces and often leaves markets flooded with counterfeit products. This increases competition, thus reducing prices for businesses who spent the initial research and development money to improve their products. These businesses should therefore be able to charge more to recoup those costs of development.

When nations believe that other nations are stealing their trade secrets, the consequences can be severe. For example, President Trump claimed that one of the primary reasons why he levied such strong tariffs on China was to get back some of the money that American companies lost through intellectual property theft by Chinese corporations.

Despite the growing awareness around the issue and actions being taken to deal with it, intellectual property theft continues to be a major issue. In fact, multiple Chinese citizens working for Apple as engineers were recently arrested for attempting to steal trade secrets from Apple regarding the company’s upcoming autonomous vehicles.

3. Governments confiscating shipments

Although international trade companies have long been forced to worry about pirates from places like Somalia interfering with shipments on the oceans, governments are now actively intercepting vessels and their cargo on a much larger scale. For example, the nation of Iran has recently seized three oil tankers in the Persian Gulf.

Iran is doing this as a retaliation for the strict sanctions that the United States government has placed on it. Trump’s sanctions are an attempt to choke off Iran’s oil sales, which are the backbone of its economy. President Trump has long criticized the 2015 nuclear deal that was struck between the two nations, and is using the sanctions to try to pressure Iran to renegotiate the deal.

The recent seizures made by Iran have irritated President Trump. As a result, he has appealed to the United States’ Western allies to create a military force that can guard vessels passing through the Strait of Hormuz and other dangerous Middle Eastern waterways. Some of these allies, such as Germany, have said no.

It appears that many nations do not want to partake in the conflict between the United States and Iran.  Considering the fact the United States’ previous long, drawn-out conflicts with Middle Eastern nations were extremely unpopular with many nations, it is not a surprise that countries are not rushing to join the United States in a military conflict with Iran. This is especially true considering the fact that nuclear weapons are at the heart of the conflict.

There’s still lots of hope for the future of trade, despite current tensions

Thanks to increases in modern technology, international trade is still thriving. However, the extensive amount of rising tariffs, counterfeiting and intellectual property theft, and government seizures of vessels are all creating problems for global trade right now. These problems appear to revolve mostly around three nations: the United States, China, and Iran. All three of these nations have vastly different political ideologies and all three are very powerful.

It is unclear how the three nations will resolve the tension in the future. However, for people around the world who work in and depend on global trade, export numbers continue to grow worldwide. With new trade deals signed regularly, the hope will be that current problems can be solved quickly and peacefully.

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With his popular battle cry of “America First,” U.S. Pres. Donald Trump has vowed to re-negotiate or bring an end to free trade agreements he sees as detrimental to U.S. jobs and manufacturing.

Along with deals like NAFTA and the TPP, China has also often found itself at the center of Trump’s protectionist cross hairs. Trump’s attacks on China’s economic policies, and his threats against Chinese imports, have led to widespread speculation of a trade war between the world’s two largest economies.

So what would a trade war between the United States and China look like? And what is the possibility that such an economic showdown will come to pass?

U.S. claims against China

At the heart of the U.S. complaint against China is the size of the trade deficit between the two countries.

In 2016, the United States had a $347-billion trade deficit with China. That makes it the largest trade deficit the United States holds with any country — it’s five times the size of the country’s next highest trade deficit, with Japan.

In total, it adds up to more than 40% of the United States’ total trade deficit. However, it is worth noting that the United States’ trade deficit with China shrank by $50 billion since 2015, and U.S. exports to China are growing faster than Chinese exports to the United States.

As president, Trump also has continued his campaign claims that China severely manipulates its currency to the detriment of the United States. In a February interview with Reuters, Trump dubbed China the “grand champions” of currency manipulation. However, Trump’s claims don’t seem to hold up to facts, according to trade experts.

Former U.S. Pres. Barack Obama had labeled China as a currency manipulator before the financial crisis began nearly a decade ago. Since that time, China has adjusted its economic policy to favor domestic consumption over exports, which has brought change in its international exchange policies. In fact, according to the last U.S. Treasury report, China meets only one of the three criteria of being a currency manipulator: having a trade surplus over $20 billion. Another U.S. Treasury report on the matter is due out in April.

What a trade war could look like

Trump, however, has threatened tariffs as high as 45% on Chinese goods entering the United States. Some analysts have speculated that tariffs could target certain Chinese imports from industries with large surpluses over the U.S., such as the steel and furniture industries, or those from state-owned corporations. Trump also said during his campaign that he would make a priority of officially declaring China a currency manipulator.

Economists have projected that a 45% tariff on Chinese exports to the United States would lead to an 87% decline in those exports. The decline of $420 billion in exports would contract China’s GDP by 4.8%. Even minimal tariffs of 15% could lead to a 1.8% dip in China’s GDP, economists reported.

The effects of such tariffs wouldn’t only be felt by China, as they could retaliate against U.S. tariffs in a variety of ways.

Should China counter with its own set of tariffs against U.S. imports, the United States could see a major blow to its economy, as China is the 3^rd largest importer of American goods, behind Canada and Mexico. U.S. industries that would be particularly hard hit — those that rely heavily on Chinese imports — include manufacturers of air plane parts, automobiles and electronics, as well as growers of soy beans and corn.

The impact of tariffs on Chinese exports could have major impacts on American companies and families. There are many American-owned companies who export goods from China into the U.S., and an estimated 1.8 million U.S. jobs rely on Chinese imports. On top of that, Chinese imports save American households up to $850 a year.

Experts have projected that the impact on the world’s two largest economies would have a profound ripple effect on the global economy.

Will a trade war come to pass?

It’s yet to be seen whether the United States will make a move against Chinese imports that could lead to a trade war. While Trump has continued his “America First” and anti-China rhetoric, he has not set forth any policy affecting trade. However, U.S. Treasury Secretary Mnuchin did make headlines earlier this month when he refused typical G20 language rejecting protectionism during a meeting in Germany.

Chinese leaders are reportedly consulting with advisers and think tanks to determine how they should react to any potential U.S. trade policies targeted at Chinese imports. At the same time, Chinese trade officials have maintained that they would like to continue an open working relationship with the United States that is based on the development of mutually beneficial trade agreements. In fact the Chinese Foreign Ministry just announced plans for President Xi Jinping’s first meeting with President Trump at his Mar-a-Lago estate next week.

“Cooperation benefits both, while confrontation can only hurt.” – Chinese Commerce Minister Gao Hucheng said during a news conference in February.

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