The historic trade war between the United States and China first started in early 2018 during the administration of former President Donald Trump. It has come back to life as a hot button issue in global economic discussions. Trump’s claims of predatory commercial behavior and intellectual property robbery first sparked the commercial war. Since then, it has devolved into a morass of tariffs, retaliatory strikes, and tit-for-tat actions across a growing sphere of influence.
Meanwhile, the U.S. Treasury Secretary, Commerce Secretary, and Trade Representative are preparing to meet China’s Vice Premier He Lifeng in the UK for critical economic talks. Markets are understandably watching this story with concern. Both Monday’s and Wednesday’s meetings could drastically move the markets. In new consumer inflation data released by the U.S. will take center stage.
The Genesis of the Trade War
The current U.S.-China trade war began when President Trump first imposed a barrage of punitive trade barriers against imports from China. The purpose of this action was to protect American jobs and American industry. This omnibus initial action was based on allegations that China was involved in unfair trade practices, such as the theft of U.S. intellectual property. In retaliation, China imposed tariffs on a slew of U.S. products including cars and soybeans. This step set off a tit-for-tat titration that poisoned relations between the two economic behemoths.
The tensions reached a peak before both nations agreed to sign the US-China Phase One trade deal in January 2020. This agreement was intended to mitigate the damage caused by the trade war. All this means is that it requires China to actually carry out structural reforms and change its predatory economic practices. The agreement is a significant step toward reestablishing calm between the two countries. The agreement faces a long road ahead, after nearly two years of heightened tensions and violence—but it seeks to restore trust.
“The Phase One trade deal was intended to pave the way for improved relations and economic collaboration.” – Economic Analyst
The Ongoing Impact of Tariffs
Though the Phase One deal was a sign of thawing tempers, the U.S.-China trade war would not stop looming malevolently over global markets. It wasn’t until recently that President Joe Biden followed through by maintaining most of former President Donald Trump’s tariffs. He likewise imposed new levies immediately upon taking workplace. These non-tariff trade barriers played an outsized role in causing global supply chain disruptions, one of the pandemic’s most widespread impacts across sectors.
These tariffs are already having very obvious effects on CPI inflation. Most importantly, we can directly trace the increased upward pressure on prices to the trade war currently raging. While businesses continue to respond to rising costs from tariffs, consumer spending has started to show cracks – especially in investment.
Trump’s new commitment as he runs for reelection in 2024 is a head turner. The first would be his stated intent to impose 60% tariffs on China if re-elected, which would more or less create a Sino-American cold war. His possible return, if not managed properly, risks sparking the trade war with even greater intensity, adding fuel to a raw and dangerous situation.
Looking Ahead: The Significance of Upcoming Talks
With the next round of U.S.-China trade negotiations expected to take place in the UK later this week, market participants will be watching closely. These meetings will focus on critical questions where trade policy and economic cooperation meets environmental sustainability and climate commitments. These issues have been at the heart of contentious disputes between the two countries.
Traders are closely watching how these consultations could affect market dynamics. Most of all, they are keyed up for the first U.S. consumer inflation data to be released Wednesday. Together, the impact of these two events have the potential to deliver new trading energy during this time of uncertainty.
“Traders eagerly await the results of both the U.S.-China trade meetings and consumer inflation data, which could set the stage for market movements.” – Market Analyst