The economic war between the US and China has reached a dangerous new level. In retaliation, the US government has further closed the door on exporting jet engine technology and advanced chip design software to China. Further, this action is in direct response to decades of accusations of China’s unfair trade practices and intellectual property theft. It would be another historic step up in the trade war that started in earnest in 2018 under former President Donald Trump.
This tension escalated between the two economic powerhouses back in 2018, when President Trump slapped punitive trade barriers on China. He made this move on the basis of antidumping measures. Since then the two countries have been caught in a tit-for-tat escalation of retaliatory measures. This war has created a massive disruption to global supply chains and significantly exacerbated inflation.
Background of the Trade Conflict
The US-China economic conflict started in earnest in 2018. That’s when President Trump slapped tariffs on Chinese imports, insisting that they were necessary to shield American industries from what he characterized as “unfair trade practices.” Intellectual Property Theft The administration repeatedly blamed China for participating in IP theft, claiming that this resulted in the stifling of American innovation and competitiveness.
In a bid to appease these complaints, the two countries signed the US-China Phase One trade agreement in January 2020. This ambitious agreement will compel China to adopt structural reforms and a new direction in its economic policies. These are all steps to restore stability and to regain lost trust between the two powers. Unfortunately, the deal’s positive impact didn’t last long as exploding Middle East tensions quickly returned to darken the economic horizon.
So, as the 2024 election campaign came into view, Trump doubled down on a more troublesome Trumpism – the hardline anti-China line. He promised to raise tariffs up to 60% if he is re-elected. Following his inauguration on January 20, 2025, the trade war resumed, reigniting hostilities that had momentarily subsided during the interim period under President Joe Biden.
Escalation and Repercussions
The intensification of hostilities has led to a series of retaliatory policies on both sides. These steps have far-reaching impacts, not just in the United States and China but across the global economy. The trade war has severely disrupted supply chains, causing increased spending and investment to be diverted into the manufacturing and agricultural sectors. In fact, as economists have pointed out, the current trade dispute is to blame for skyrocketing inflation. This link is most obvious in the Consumer Price Index.
President Biden’s administration has mostly continued the Trump-imposed tariffs, adding new tariffs on imports from China. In response, China has enacted its own restrictions, notably limiting exports of critical minerals essential for technology and manufacturing sectors in the US. These changes only heighten the tension in the bilateral economic relationship. Both sides are striking heavy-handed retaliatory blows that will immediately and further inflame the situation.
In recent months, the Biden administration has moved to limit sales of other critical technologies to China. This suspension on exports will touch on the most cutting edge advanced jet engines and the most advanced semiconductor technology. These technologies are critical to China’s aerospace and technology sectors, which are developing rapidly. Such actions are symptomatic of a justifiable rising fear among American leaders of the national security ramifications associated with technology transfers.
Future Implications
The risks inherent in US-China relations threaten a far deeper economic integration and well-heeled global order. As both nations continue to impose tariffs on each other’s goods—ranging from automobiles to agricultural products like soybeans—the ripple effects are felt worldwide. Supply chain disruptions will be felt for the foreseeable future, impacting economies outside of those directly warring.
Now, analysts are sounding the alarm on increasingly dangerous friction points. They caution that these conflicts might fragment the global economy, forcing nations to align themselves further with either the US or China depending on trade practices and economic relations. The long-term impacts of such a divide would arguably radically alter the future trajectory of international relations and economic dynamics for decades after.