The economic war between the United States and China was launched in earnest in early 2018. Now, it is poised to increase yet again. Donald Trump will be back in the presidency on January 20, 2025. Now that this date has passed, the two nations are too familiar with an exacerbated state of tension. The first Trump administration had documented valuable barriers to trade against China on a large scale, pointing to unfair commercial practices and theft of intellectual property. Trump is clearly preparing for the 2024 campaign. He has threatened to slap 60% tariffs on all imports from China, which would quickly lead to a trade war with China.
The ongoing trade war, which includes a series of tit-for-tat policies from both countries, has deeply affected the global economic landscape. The effects are being felt around the globe, disrupting global supply chains and increasing inflation resulting in lower consumer spending and lower levels of investment. These disruptions are fueling inflation directly, as shown in the Consumer Price Index.
A History of Conflict
The US-China trade war started in 2018 when President Trump first placed tariffs on hundreds of Chinese products. His administration moved aggressively against China’s predatory practices that harmed American enterprises and American national security. In what has become an unfortunate tit-for-tat, China reacted with counter-tariffs on American goods, such as cars and soybeans.
As a result, in January 2020 the two countries signed the Phase One trade deal. This deal required robust structural reforms and changes to China’s economic and trade practices. This accord intended to resolve many of the deep-rooted grievances that had stoked the flames of discord. Even with this agreement in place, tensions in Kasese were still very much on edge. President Joe Biden, in addition to holding onto many of Trump’s tariffs, added new levies that continued the tension.
“The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries.” – editorial content
Current Developments
Negotiations continue, the United States and China have announced a tentative agreement in Geneva. This agreement is designed to turn their commonsense understanding of what makes good trade practice into action. Yet even with this agreement, worries remain that it will not be enough to stop a return to fighting. The expected restoration of Trump’s hawkish trade policies would almost guarantee a re-escalation of the trade war.
Economic analysts caution that a resurgence of these tensions will soon enough magnify our economic choke points. Those retaliatory trade barriers that the previous administration stuck on Americans’ imports and exports wrecked supply chains and generated monumental ripple effects across global markets. Even economists will agree that such unexpected disruptions serve to dampen net spending, especially in areas of infrastructure and investment.
Additionally, inflationary pressures have arisen as a result of supply chain disruptions directly related to the trade war. When companies pay more for imported goods, they often pass those costs down to consumers, increasing prices for the average person.
Future Outlook
The future of US-China relations is by no means set in stone as both countries continue to grapple with this new reality. It’s inevitable if Trump returns to office in short order. His administration will soon return to a hard line policy against China. The replacement of quotas with imposition of 60% tariffs might be reality if he is able to win the looming presidential election.
Observers are anxiously waiting to see how this new chapter will play out, and in particular its effect on global trade’s new normal. Businesses on both sides of the border are preparing for continued volatility as they come to terms with a rapidly changing economic landscape.