The US-China trade war began in early 2018 during the administration of President Donald Trump. As we prepare for the 2024 election, it has returned with a vengeance. These are the tariffs that Trump initially erected as trade barriers against China. He justified this move on the grounds of alleged unfair commercial practices and intellectual property theft. This sent the signal for a long chain of retaliatory moves from China to follow. To this end, both countries experienced profound economic repercussions that affected the world economy as well.
Trump’s political ambitions are just as predictably coming back to life. He recently reiterated threats to impose draconian tariffs on Chinese imports should he return to the White House. The implications of this renewed conflict are enormous. It further strains global supply chains and increases consumer prices, injecting additional uncertainty into already troubled international markets.
Origins of the Trade Conflict
This debate took a fiery turn in 2018 when Donald Trump kicked off the trade war by imposing tariffs on a substantial portion of Chinese imports. He blasted China for its unfair trade practices and theft of intellectual property from American businesses. Countering the first round of US tariffs, China unveiled tariffs on $50 billion in US goods. These tariffs were aimed directly at industries such as automobiles and agriculture, particularly soybeans. This swapping of tariffs initiated a booming political and economic clash. It whetted the appetite for a monumental and intentionally destructive clash between the two biggest national markets on the planet.
This trade war escalated so quickly that many are still reeling from the potential long-term effects on both economies and their deeply rooted supply chains. Companies on both ends had no idea what to expect as they attempted to traverse the quicksand of tariffs and trade barriers that seemed to materialize overnight. The trade war hit an important turning point in January 2020 when the two countries signed the Phase One trade agreement. This agreement aimed to restore stability and trust between the US and China by necessitating structural reforms in China’s economic and trade regime.
The Phase One Trade Deal and Its Impact
The recently-signed Phase One trade deal represents an important turning point in the two-year trade war. Each country promised to make concrete changes that would positively affect trade between the two. As part of this deal, China agreed to improve its intellectual property enforcement. It promised to increase its purchases of US goods, and the US agreed not to enforce some tariffs on Chinese products.
While these politics were successful in calming immediate hostility, they failed to change or address the root grievances that perpetuated the war. While it provided temporary relief, many experts argued that deeper systemic changes were necessary to address the core grievances identified by the US. Consequently, the spike in tensions continued into the following years, especially as Joe Biden assumed the presidency in January 2021.
Yet that was exactly what Biden’s administration chose to do by keeping most of the Biden tariffs in place. They imposed new, selective levies on Chinese goods. This strategy understood the necessity of engagement with China. It amends those wins with a reminder that serious concerns about adverse trade practices and national security remain unaddressed.
Renewed Tensions Under Trump’s Potential Return
As the 2024 presidential election approaches, Donald Trump’s potential return to the White House has sparked fresh tensions in US-China relations. During his presidential campaign he consistently pledged even greater and more punitive tariffs—up to 60%—on imports from China. This promise has raised alarms among economists and business leaders who fear that such drastic measures could exacerbate existing tensions and further disrupt global supply chains.
If Trump were to return to office on January 20, 2025, he would be able to keep his campaign promise. This unfortunate decision could initiate a trade war like that of his first term. The possibility of new and increased tariffs is particularly alarming given their demonstrated corrosive effect on global economic stability. As noted, higher tariffs will inevitably increase costs for all American businesses that rely on Chinese imports. This would only increase costs for consumers and stifle overall economic growth.
The impacts of an escalated trade war would be felt well outside of the US and China. Global supply chains are not just interdependent, they are almost universally critical. Disruptions in trade between these two powers can cause a domino effect that affects nations around the globe. Businesses can expect longer delivery times, higher prices, and fewer chances to invest as they deal with the unpredictability of shifting tariffs.
Economic Ramifications for Global Markets
The current US-China trade war has already caused significant upheaval in global supply chains. To meet the challenges of shifting tariffs and domestic markets, companies are quickly pivoting their strategies. In response, they might even reduce their investment spending, further depressing economic growth over the long term. This contraction can feed directly into inflation metrics like the Consumer Price Index, as rising costs are passed on to consumers.
Economists have cautioned that bringing back the tariffs would heighten tensions. If that’s the case, they estimate a $239 billion drop in consumer spending. A slowdown in investment might dampen innovation. Third, it would seriously restrict U.S. productivity growth, in particular industries most dependent on the global marketplace.
As companies move forward in this unpredictable new normal, most are leaning out their supply chains. At the same time, other companies will be motivated to diversify their procurement sources, moving production out of China entirely in order to avoid this risk. The influence of these changes is sure to affect not just profitability, but the configuration of manufacturing worldwide in the years ahead.