2018 China-United States trade war

The 2018 China-United States trade war refers to an economic conflict between China and the United State that began in 2018 when President Donald Trump introduced several new tariffs and trade barriers against China. Trump argued that China was exhibiting unfair trade practices that perpetuated the trade deficit, allowed for theft of intellectual property, and forced American technology companies to share their technology in exchange for access to Chinese market. Trump had supported such actions against the Chinese government for decades prior to his presidency, and he regularly made reference to imposing tariffs against China during his presidential campaign. China responded to these tariffs with their own tariffs and penalties against the United States, leading to a full on trade war between the two countries.

The economic community has issued varying opinions regarding the trade war. While experts cannot agree on whether the ongoing trade deficit is problematic, most believe the tariffs that have been imposed will not resolve the deficit. Experts have noted the trade war has negatively impacted a number of business sectors in the United States including agriculture, manufacturing, and technology. It has also had a detrimental effect on global markets and created stock market instability. Although a number of politicians do agree that China’s trade practices are unfair and in need of negotiating, most have considered Trump’s decision rash and inconsiderate of multiple repercussions.

Background

As the United States and China are the two largest economies in the world, both countries have played important roles in the world economy. The United States is the world’s largest importer while China is the world’s largest exporter. The two countries have had a storied trading partnership over the course of history, with the United States importing billions of dollars’ worth of Chinese goods annually as of the late 2010s. Throughout this relationship, the United States has used tariffs and other trade barriers as a means of negotiations when certain imported Chinese goods compromised the demand and productivity of the same American-made goods. Trade tariffs have also been imposed on China in the past in response to political upheaval, such as the Chinese government’s attempt to suppress the Tiananmen Square protests in 1989.

In 2000, the U.S. Congress introduced the United States–China Relations Act of 2000, which gave China permanent normal trade relations (NTR) status upon China’s entry into the World Trade Organization (WTO). President Bill Clinton believed increasing trade with China would improve the American economy, but not before China cleaned up its trading practices and ensured illegal content such as pirated materials that included music and films were not imported into the United States. Clinton also supported China’s new status because he believed it would allow for American goods to be sold in China without those goods having to be produced in China, therefore reducing the amount of job outsourcing to China. The act opened Chinese markets to American imports and China reduced tariffs on American goods, but problems with intellectual property persisted after China’s entry into the WTO. Over the next decade, the U.S. economy suffered billions in losses due to Chinese intellectual property theft. China also still required technology companies to share technology in order to gain access to the Chinese market, a practice that violated WTO rules.

Concerns about Chinese trade practices continued to plague the American economy into the late 2010s. President Barack Obama was forced to address China’s violations of the WTO’s free trade agreement. Lawmakers accused China of limiting foreign investment, manipulating its currency, allowing intellectual property theft, and misrepresenting trade by providing government subsidies to various sectors. Politicians and business leaders also complained about the sharp decrease in manufacturing jobs since the United States–China Relations Act was enacted. One business leader who showed particular distaste for Chinese trade practices was Donald Trump, who called for tariffs to address China’s impact on the American economy. When Trump ran for president in 2016, he promised his supporters that if elected he would impose tariffs against China in response to its unfair trade practices.

Overview

Donald Trump won the 2016 presidential election. In March 2017, he issued two executive orders calling for stronger tariff enforcement in anti-subsidy and anti-dumping trade cases as well as a review of the US trade deficit. Trump met with Chinese Premier Xi Jinping shortly after these orders were released, and the pair agreed to enter trade talks. Trade talks failed to come to a compromise, however, and that August Trump ordered an investigation into Chinese intellectual property theft. His first action against China was indirect, imposing tariffs on all imported washing machines and solar panels in January 2018. Two months later, he imposed a 25 percent tariff on steel imports and 10 percent on aluminium imports from all suppliers, including China. China responded to the tariffs by imposing its own tariffs on 128 U.S. products. Trump then announced his intentions to impose 25 percent tariffs on $50 billion of Chinese goods. China responded to this announcement by saying it would enact retaliatory tariffs on the same amount of US goods.

Trump officially imposed his 25 percent tariff against China in July 2018 and China responded with its own 25 percent tariff against American goods. The event officially kicked off the trade war between the two nations, and over the next year the United States and China imposed a number of tariffs against each other. For each dollar amount of Chinese goods the United States placed tariffs on, the Chinese government responded in equal measure. Efforts to come to a new trade agreement failed throughout early 2019 as the two countries continued to quarrel over what should be included in the trade pact. American economists worried that the trade war was negatively impacting the U.S. economy, and the stock markets plunged with each tariff announcement. A number of American industries were negatively impacted by the trade war including technology and automobile makers as well as the agriculture sector.

In December 2019, China and the United States reached an initial deal meant to resolve its trade conflicts, with the United States agreeing to remove several existing tariffs on more than $300 billion in Chinese goods and cancel the introduction of new tariffs on other goods. Tariffs would gradually be rolled back in phases, and in return China committed to purchasing agriculture products among other concessions related to intellectual property and technology transfer. Experts hoped the deal would resolve the drawn-out tensions between the two countries.

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