SUMMARY
Join us in this short podcast as Damon and Mike discuss a recent hot topic: trade wars.
You’ll also find short activities to practise some of the useful vocabulary for discussing this topic.
Tip: Click the
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TRANSCRIPT Damon: Hello and welcome to our very first topical podcast. Today’s podcast is going to be on trade wars. I’m Damon and today I’m with… Mike: That’s me, I’m Mike. Damon: Hi Mike, how are you today? Mike: Not too bad Damon, how are you? Damon: Yeah, pretty well, thanks, pretty well. So, Mike, I have a few questions for you about trade wars. Perhaps you can answer them for me. Mike: Sounds good, go ahead. Damon: Right, I guess you’ve noticed we’ve been reading a lot in the newspapers lately about some rather large trade wars. But I’ve noticed there are a lot of specific terms that are mentioned in connection with trade wars. Maybe you can explain a couple of them to me. So, maybe you can explain what Mike: Sure thing, so there’s no country on the planet that makes all the things that its people, or Damon: Billions of dollars, ok, that sounds like a lot of dollars. So I guess billion is a big number. How many thousands are there in a billion, Mike? Mike: You’re trying to catch me out now, aren’t you? There are a million thousands in a billion, so, yeah, it’s a lot of money. Damon: A million thousands in a billion. So we’re talking about a one with nine zeroes after it. Mike: That’s right. I don’t even have half of that Damon! Damon: Ok, well, that’s really a lot of dollars. So I can see why it’s interesting for countries to be focussed on their surplus or more specifically their deficit, perhaps. Maybe you can give me a couple of examples of countries that have surpluses, so countries that export more than they import. Mike: Absolutely. China is the most obvious one and Germany too, of course, they are two of the biggest exporting nations in the world. Both of those countries produce far more of some products than they use and they export the rest. Damon: Ok, so I think we’re all quite familiar with the fact that ‘Made in China’ shows how many products are being exported from China. And Germany, what’s Germany exporting? Mike: Well, the obvious one which springs to mind would be the German automobile industry, it’s a massive exporter. Damon: Ok. And perhaps maybe machines and machine building technology from Germany? Mike. Industrial equipment, absolutely. Damon: Ok, and on the other side of the spectrum we talked about countries that have a trade deficit. So, if I understand correctly, they are importing more than they are exporting. Can you give me an example? Mike: Yeah, you’re absolutely right, a country which imports more than it exports has a trade deficit. American would be a fantastic example of this, it currently has the largest trade deficit in the world importing far, far more than it exports. Damon: Ok, I have to say that doesn’t surprise me actually. We know how much Americans like to spend. Ok, so, I mean, the topic of today’s podcast is really trade wars. That’s really the basics of trade with this idea of surplus and deficit but what triggers a trade war, so to say? Mike: Well, speaking very simply, a trade war generally starts when a country places or raises taxes on goods that are imported from other countries. That’s normally the first thing to happen. Taxes placed on imported goods are called Damon: Ok, so, a tariff is basically a tax on imported goods. Can you give a couple of examples of situations where we’ve seen this happening? Mike: Yes, recently in fact, we have seen the United States of America place or raise tariffs on several imports including European cars, many Chinese products, and all steel imports. Damon: Ok, a lot of German cars, I should imagine. Mike: That’s right, yeah. Damon: But why would a country want to do that? Why would they want to raise tariffs on their imports? Mike: Well, again, speaking very simply, the idea behind taxing products like this is that it makes them more expensive than local versions of the same products. Theoretically, Damon: Ok, so basically it kind of stimulates production of these products in a country that’s importing them normally. That’s simple enough but I don’t understand how that escalates then into a trade war. Mike: Well, let’s stick with the America/China example. When America raised tariffs on many Chinese products, China responded by placing extra tariffs on imported American goods. This caused big damage to the American farming industry. Damon: Ok, so there’s kind of a retaliation effect with increasing the tariffs. Mike: Absolutely, yeah. Damon: Ok, and, I mean, what’s the risk for the countries involved then if both countries start to raise their tariffs on the goods that they’re importing? Mike: Well, certainly with the very large exporting nations, two of which we’ve already discussed: Germany and China. The Damon: Ok, so they feel the effect of the raised tariffs much more quickly than the effects of stimulating the production of these goods or services in their countries. I mean, can a trade war between two countries have wider effects? If it’s, you know, we’re just talking about America and China, why is that interesting for the rest of the world? Mike: Yeah, absolutely, trade wars throughout history have always destabilised the global economy, not just the economy of the participating countries and when the global economy is destabilised, investors get nervous and companies can lose millions of dollars in their share price overnight. This means: fewer jobs, less investment, and lower Damon: Ok, so it can have a very serious knock-on effect to a lot of parties involved and companies can really lose a lot of money very quickly, especially because of the loss in their Mike: That’s right, yes. Damon: Ok, what should a country with a trade deficit do then? If a country is worried about importing more than it’s exporting, I mean, it sounds bad! What should they do? Mike: Well, it’s far too simple to say that a high trade deficit is bad. It can simply mean that you have a rich country full of people who want to buy expensive consumer goods such as computers, smartphones, other electrical appliances that just aren’t made in that country. Damon: Ok, so it’s not as simple as it seems, yes? It sounds quite good, so I mean, it’s perhaps a positive sign for the country in question if they do have a trade deficit, it means they’re doing well, yes? Mike: That can definitely be the case, a trade deficit is not always a bad thing. Damon: Great. Well thank you very much for your explanations Mike. Maybe we can review some of the vocabulary that came up. |
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| KEY VOCABULARY (alphabetical order) |
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| billions of dollars |
| citizen |
| consumer |
| goods |
| revenue |
| salary |
| share price |
| tariff |
| trade deficit |
| trade surplus |
Exercise 1 a: Match the words.
Exercise 1 b: Fill in the missing letters.
Exercise 2 a: Choose the correct word from the drop-down lists.
Exercise 2 b: Choose the correct word for each sentence and fill in the blanks.
Exercise 3
So, what is a trade war? Take the chance and explain to your trainer in your next session!