Since summer 2018, the US-China trade war has caused massive disarray and antagonism. With Donald Trump’s likely return to the employing seat on Jan. 20, 2025, it is poised to erupt anew. This reinvigorated conflict comes on the heels of Trump announcing his intentions to eliminate fentanyl-related tariffs on imports from China. He plans to freeze certain reciprocal tariffs on Chinese goods. The trade war started in earnest when Trump first announced his intention to penalize China for unfair trade practices and IP theft. Her accusations spawned retaliatory trade barriers that have to this day severely harmed the economy of both countries.
On January 15, 2020, the two countries signed the US-China Phase One trade agreement. This accord sought to bring back balance and confidence in their relationship. The deal was intended to compel China to make sweeping structural reforms and adjustments to its mercantilistic economic and trade practices. Even with all of these collective efforts, tension has continued to boil over. In response to US tariffs, China has enacted their own tariffs on a wide range of US products including automobiles and soybeans.
Background of the Trade Conflict
The current trade war started in 2018. This is exactly what President Trump sought to do when he took action against unfair trading conditions that China had imposed on American firms. This time, he focused on several sectors, alleging Chinese practices weakened American companies and resulted in billions of dollars of intellectual property theft. His administration’s aggressive nationalist trade platform featured across-the-board tariffs intended to save US industries – namely steel – from foreign competition.
China wasted no time in retaliating against these tariffs, slapping exorbitant tariffs on American products in kind. This step was a dramatic increase in the economic hostilities between the two countries. The tit-for-tat between the two countries created a climate of increased instability for companies and investors. The impact was felt across the country, disrupting global supply chains and causing investment expenditures to experience their largest-ever drop.
Ongoing Tariffs and Recent Developments
Under President Joe Biden, though, the current tariffs mostly stuck around—some even new levies were added. Yet this stagnant stage of tariffs has maintained a boil just beneath the surface, as both nations moved through their own economic adversities. Phase One was not intended to be a comprehensive agreement that would eliminate all U.S.-China tensions. It aimed to achieve a more reciprocal, balanced trade relationship.
The trade war with China has gone much deeper than just raising tariffs. It has played a role in inflationary pressures within the United States—which is evident in the Consumer Price Index. With prices skyrocketing due to the current war, American consumers are the ones suffering. Simultaneously, businesses are facing an increased cost of doing business due to tariffs.
His recent tariff announcement on fentanyl-related imports is the latest indication that Trump is changing strategy as he readies for the 2024 election campaign. He’s reduced the tariffs from 20% to 10%. Taken as a whole, this move calms fears over DTCC’s drug imports and demonstrates his willingness to cooperate with China on a narrow set of shared goals. He has promised to slap 60% tariffs on China if he is re-elected. This points to a reversion to a more hardline trade stance should he be elected to another term.
Implications for Future Trade Relations
With the trade war’s dramatic return under Trump’s watch, the long-term trajectory of US-China relations remains uncertain. The economic conflict, characterized by extreme protectionism, could lead to further disruptions not only between these two nations but within global markets. Sounding alarms on how those escalations can further fuel already-inflected inflationary pressures and ultimately derail economic recovery progress made in sectors from travel to manufacturing.
As the trade war restarts, protagonists on both sides will play a treacherous game on these twin fronts. Higher tariffs might deter investment and spending further still. This would be so as to make it much more difficult to stabilize economies already wrestling with the long-backed costs of the pandemic.