The United States-China economic cold war is ushering in a dramatic new chapter. President Trump and Chinese leader Xi Jinping are prepared to begin laying the groundwork for a trade deal. From its start in 2018, the trade war has grown sharply. It started when Trump decided to levy trade barriers against China, arguing that unfair commercial practices and IP theft warranted such an action.
When the US-China Phase One trade deal was signed back in January 2020. It sought to bring back stability and confidence among these two central banks of the world’s economy. This accession agreement required onerous structural reforms and far-reaching alterations to China’s economic and trade regime. Under President Joe Biden, the Biden administration has continued to enforce a majority of the current tariffs on China. Shortly after taking office, he even raised the levies further, doubling down on a hardline commitment.
Background of the Trade Conflict
In 2018, under the leadership of President Trump, the U.S. government did the courageous thing by protecting these American industries. This policy change planted the first seeds of the current US-China economic conflict. He stated that China’s trade practices are harmful to the economic interests of the U.S. He accused them of committing intellectual property theft and other trade dim practices. All of these allegations led to a series of tit-for-tat tariffs from China, which zeroed in on important U.S. exports including cars and soybeans.
The Phase One trade deal was supposed to de-escalate the ongoing rivalry between the two countries. It represented a temporary truce in the one-sided, ongoing trade war. The deal included pledges from China to buy more American products and to alter its trade practices. Though it granted temporary relief, original problems were still left unaddressed paving the way for further instability in bilateral relations.
Recent Developments and Future Outlook
If things go according to plan, Donald Trump will return to the White House on January 20, 2025. This has resulted in a cascading second wave of bilateral tensions between the two countries. Trump is not only on the campaign trail, but he’s dominating the 2024 election. For starters, he talks a tough game on trade, pledging to slap 45% tariffs on China’s imports on his winning day. This declaration has raised alarm that the US-China trade war is set to reignite. There is also the worry that tit-for-tat exception clauses might lead to greater destabilization of the global economy.
In the backdrop, on both sides of the border, top economic officials have been sounding increasingly upbeat about the prospect of agreement on a new trade deal framework. U.S. Treasury Secretary Scott Bessent was on hand to reassure those fears most recently during last month’s talks. Specifically, he rebutted Trump’s proposed 100% tariffs on all Chinese imports that were to go into effect on November 1. China has announced its intent to delay the rollout of its licensing regime on rare earth minerals and magnets by a year. This decision will go a long way in diffusing those tensions in the near term.
Impact on Global Economy
The impact of the US-China trade war has reached far beyond these two countries, dramatically reshaping the entire global economic landscape. We are witnessing dramatic disruptions of global supply chains. More critically, consumer demand is down, exacerbating the inflation reflected in the Consumer Price Index by pulling it in the opposite direction. Both nations’ economies are racing through a resurgent wave of warfare. As a direct result, shippers—both businesses and consumers—are left with uncertainty around pricing and the availability of goods.