International Marketing Practices

The Trade War With China and the COVID-19 Global Pandemic The trends discussed in this chapter show that China has become a key player in forest products trade and manufacturing, and a major partner of American exporters. U.S. hardwood lumber producers hit by the recession of 2008-2009 have increasingly relied on fast-growing Chinese markets for their products. In fact, in less than 20 years (1999- 2017), the share of U.S. hardwood lumber exports going to China grew from less than 5% to over 50%, by volume (Figure 3). However, in 2018, the U.S. government began imposing tariffs on thousands of Chinese imports to adjust what it considered unfair trading practices. China responded in kind, and by the middle of 2019, the two largest world economies were engaged in a trade war. The U.S. imposed tariffs on more than $360 billion of Chinese products, and China retaliated with tariffs on more than $100 billion of U.S. products, including hardwood lumber. The impacts of these developments on the U.S. hardwood lumber industry have been devastating. For example, total annual exports of U.S. hardwood lumber to China fell by 40% from 2018 to 2019 (Figure 3). On January 15, 2020, the U.S. and China signed “phase one” of a trade deal in an effort to relieve tensions between the two countries [43]. However, the outbreak and rapid spread of the novel coronavirus (COVID-19) that originated in China threatened to delay implementation of the deal. Government actions, including quarantines, temporarily halting factories and flights, and travel restrictons, disrupted supply chains and slowed down commerce [44]. By the end of April 2020, the U.S. economy faced its worst economic downturn since the Great Depression, with more than 20 millon jobs lost in April [45] and global trade dramatically reduced [46]. This example shows that international trade is subject to additional uncertaninties that are usually not present in domestic operations.

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Figure 3. Percentage of U.S. hardwood lumber exported to China (left), and U.S. hardwood lumber exports to China as a percentage change from the previous year (right) [47, 48].

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