There are no true winners in trade wars

Editor's Note: Ryan Patel is a senior fellow with the Drucker School of Management at Claremont Graduate University. The article reflects the author's opinion, and not necessarily the views of CGTN.

Over the years, different parts of the world have experienced political turmoil that has proven costly. Trade wars have a detrimental effect on all and have proven that there are no true winners. But with that said, what about the countries that are deemed or perceived to be instigating the turmoil initially? In today's piece, I will be discussing this issue through an academic lens to examine the viewpoint of the assumed ‘instigators' -- the perceived countries who began the turmoil, in three recent instances.

In 2016, there was a referendum based on the United Kingdom's decision to leave the European Union. In 2017, the Gulf Crisis entailed the United Arab Emirates (UAE), Saudi Arabia, and Bahrain severing their ties with Qatar after it refused to heed their call on termination of the state's foreign policy. In 2018, a trade war began between the United States and China. It seems that the ‘instigators' might be affected more than anticipated.

No winner in a trade war. /VCG Photo

Given these trade wars and blockades, there are increased business problems in these regions. However, one can argue and perceive the instigating countries in these cases could arguably be the U.S., Saudi Arabia, UAE, Bahrain, and EU. These countries seem to have focused on how they would benefit from the trade wars and blockades more than realizing the damage to themselves. Even though the losses might be shared among both parties of a trade war or blockade, the time has shown that the economic suffering for these instigating countries has been the more prevalent outcome than the desired resolution of a clear one-sided economic success.

In the case with the blockade of Qatar, after refusing to drop its long practiced policy, as requested by Saudi Arabia, the United Arab Emirates, and Bahrain, Qatar stated that the 13 demands from these countries were a threat to sovereignty and would be a violation of international laws.

The blockade and cutting ties affected Qatar given its dependence on land and sea imports, particularly for the basic needs (BBC, 2017). More so, the UAE, Egypt, Bahrain, and Saudi Arabia went ahead to close their airspace to Qatari aircraft in addition to affirming that international and foreign airlines would have to acquire formal permission for overflights to the subject country.

Such restrictions made the Doha's Hamad Airport less busy and Qatar Airways canceled flights to 18 regional cities as a consequence (BBC, 2017). As a result, Qatar ended up experiencing a 10 percent loss in the stock market, which amounted to 15 billion dollars within the first month.

On the other hand, particularly UAE and Saudi Arabia, have started to experience the side effects of the Gulf crisis too. For Saudi Arabia, the key area affected has been the exports that previously moved from Saudi Arabia to Qatar affecting the industrial sector and accessibility to agricultural goods that have gone down.

The China-U.S. trade war. /VCG Photo

As for the UAE and Dubai, to be more specific, the implications and collective influence of the blockage is more crucial than originally expected (Aljazeera, 2018). Some of the repercussions have included the shift of financial transactions from Dubai to other regions where Qatar has strong economic and social ties, for instance, London or New York.

At this juncture, it does not seem there is any form of instability or panic within that one might expect the Qatar government to increase spending or utilize foreign reserves as a boost of the economy. All the same, all involved have faced similar results as compared to the desired benefits expected when the blockade started.

In fact, the same fate can be said as we witness the China-U.S. trade war and Brexit unravel. For the United States, the Trump administration has focused on the Chinese economic policy that has resulted in a broad-based economic clash that would possibly have a negative impact on the global economy given the influence of both China and the U.S. (Wilson, 2018).

Specific repercussions of the trade war between China and the U.S. in addition to the UK' Brexit decision depict that there may not be one country who necessarily have the last laugh. With Brexit, whether it is the EU (who forced the UK's hand in holding a referendum after they refused to provide the former UK PM the concessions he needed) or the UK (who decided to leave the EU after the referendum) who is viewed as the instigator, the prospect of a no deal outcome leads on all economic analysis to a cut in trade between both the EU and UK and so negatively impacting both parties.

The UAE/Saudi led blockade, Brexit, and the China-U.S. trade war all cause increased trade and corporate problems in crucial parts of the international economy. The instigating countries may be expected to benefit from these critical situations, but in all cases, the loss is shared by all with even some experiencing more disadvantages than the anticipated benefits. These type of trade wars tend to hurt all involved and have no true winner.

(If you want to contribute and have specific expertise, please contact us at opinions@CGTN.com)