The trade war between the U.S. and China, which began in earnest in early 2018. Recently, it’s been riding high on the waves of renewed attention. This latest ratcheting up of tensions follows a wave of trade restrictions first imposed by former US President Donald Trump. He criticized China for its predatory trade practices and for intellectual property theft.
The war flared when President Trump began slapping tariffs on the majority of Chinese products. He maintained that these steps were important to defend American industries. In response, China imposed tariffs for the first time on a variety of US goods. This list even encompassed automobiles and soybeans, further worsening the pressure on the bilateral economic relationship.
The Phase One Trade Deal
In January 2020, the US and China moved in the right direction by solidifying that progress with the Phase One trade deal. This treaty ended the growing friction between the two nations. This deal needed to be the basis for forcing China to make structural reforms and changes to their economic and trade regime. The agreement was intended to provide long-term stability and help rebuild confidence between the two nations.
At a meeting with the President of South Korea, Kim Jong Un, President Trump reiterated his hopes that China would live up to the terms of the agreement. As the months wore on, questions over their compliance started to raise their ugly heads, sowing the seeds for worries about the longevity of the deal. At first, prospects looked promising for thawed relations between the two countries. Time and again, they have failed to live up to the spirit of the deal as written.
Trump’s Return and Renewed Tensions
Now with the imminent return of Donald Trump to the White House as 47th President, tensions in US-China relations are once again flaring. During his 2024 election campaign, Trump pledged to impose a staggering 60% tariff on Chinese goods, raising fears of an intensified trade war. On January 20, 2025, he would keep his promise by going through with the threat and imposing the tariffs. This move heightened the already fraught economic environment.
The outbreak of this renewed conflict has already begun inspiring intense debate among policymakers and economists alike over the potential longer-term effects it could have on both economies. High tariffs might significantly increase prices paid by consumers. They have the tendency to upend long-standing supply chains, which often has negative repercussions for industries on both sides of the trade.
Future Prospects for US-China Relations
Despite those challenges, US Treasury Secretary Scott Bessent recently expressed some cautious optimism. He suggested that a US-China rare earths agreement could be concluded by Thanksgiving. This development could signal a willingness from both sides to engage in negotiations and seek common ground despite their differences.
A bilateral rare earths agreement would be an unexpected boon indeed, igniting optimism over improving US-China relations. Yet even still, many are unconvinced that US-China trade relations are on the mend. If only it were that easy. Both countries are still feeling their way through a tricky economic landscape. Next steps require deft diplomacy and sustained discussion to address root causes and tension to restore stability.