The economic war between the United States and China first launched in early 2018 has recently escalated. Both countries are preparing for a new round in their trade war. The tussle started two years ago when President Donald Trump started slapping tariffs on China. He identified incurred unfair commercial practices—mainly theft of U.S. IP—as his justification for taking these actions. In retaliation, China struck back by placing tariffs on a variety of U.S. products—from cars to soybeans.
The US-China Phase One trade agreement signed in January 2020. While the deal sought to bring back a sense of stability and trust by negotiating structural changes to China’s economic and trade policies, frustration has yet continued to brew beneath the surface in U.S.-China relations. Following President Joe Biden’s inauguration, he maintained many of Trump’s tariffs and even added new levies, signaling that the trade conflict was far from resolved.
Escalation of Trade Barriers
The beginning of this trade war goes back to early 2018, when President Trump first started to raise protections against China. He took aim at what he deemed as discriminatory trade practices, focusing on retaliatory and unjust violations, especially those that infringe on intellectual property rights. This was a revolutionary change for U.S.-China relations, as both countries started appearing at each other’s throat.
“Trade barriers were implemented to protect American interests and counteract unfair practices,” said an economic analyst familiar with the situation. In combination with these barriers, as soon these U.S. tariffs started to bite, China retaliated with a slew of its own tariffs on U.S. exports. The retaliatory actions targeted American farmers with tariffs on cars and farm exports such as soybeans.
The effects of these tariffs were widespread, reaching into dozens of industries and disrupting supply chains while increasing prices for consumers. As each side participated in this tit-for-tat sparring, the possibility of a protracted trade war became more imminent.
Phase One Trade Deal: A Temporary Respite
When the US-China Phase One trade deal was signed in January 2020 that short-lived calming effect replaced months of rising antagonism. This deal required 28 specific structural reforms to be made in China’s economy, aimed at tackling U.S. concerns about unfair trade practices. The agreement hoped to bring back some sanity and confidence to the relationship between the two countries.
While these were laudable moves in equity, they failed to address the systemic culture that continued to fester. Economic analysts ascribed that positive outcome entirely to the Phase One deal’s success in easing tensions. It removed them entirely and that was demonstrably false. President Biden’s administration has opted to retain many of the tariffs set by his predecessor while introducing additional levies to further pressure China.
“The US and China have not conducted negotiations or consultations on tariffs,” said a spokesman from China’s Foreign Ministry, highlighting the stagnation in diplomatic efforts regarding trade relations.
Unfortunately, with each side firmly dug into their grooves, the chances for productive negotiations don’t seem promising.
The Future of US-China Trade Relations
Looking toward the future, the environment surrounding US-China trade relations is riddled with uncertainty. With former President Trump officially in the race again, many legislators are looking to a potential 2024 election. He says in his platform that he’ll raise Chinese tariffs, vowing to raise them up to 60%. If he makes it back to office as the 47th U.S. President on January 20, 2025, trade spats are likely to be skyrocketing. This change could have dramatic impacts in international diplomacy.
Recent analyst predictions indicate that if these hostilities were to resume, new spirals of global supply chain chaos could exacerbate mounting inflationary pressures on consumers. Firms have begun to adjust to the new normal created by the swirling uncertainty of tariffs and trade policy. Beyond that, many are bracing for long-term repercussions that ripples throughout the global economy.