The United States–China trade war is intensifying. Cumulative tariffs on Chinese imports thus far have now jumped to an incredible 145%. This trade war began in earnest at the beginning of 2018. The effect has been a largely indiscriminate set of tit-for-tat tariffs, as both nations have retaliated across a broad swath of goods. As the situation unfolds, key players in the trade war continue to navigate the complexities of international commerce, raising concerns about global economic stability.
Yet in January 2020, a Phase One trade deal sought to do just that, calming tensions and hopefully recreating an ambiance of camaraderie and trust between the two countries. The chips are still down. Recent happenings show that the sticks are still stuck in the mire. US Trade Representative Jamieson Greer confirmed that President Donald Trump and Chinese President Xi Jinping “don’t have any plans” to communicate amid the escalating trade war, leaving many to wonder about the future of US-China relations.
Background on the Trade Conflict
The US-China trade war commenced when President Donald Trump imposed trade barriers on China, citing unfair commercial practices and intellectual property theft. These first tariffs ignited an economic wildfire. Since then it has morphed into a bewildering labyrinth of trade barriers and retaliatory tariffs.
China countered these tariffs by imposing its own tariffs on a wide array of US products, from automobiles to soybeans. These back-and-forth measures have sowed confusion and increased hostility on both markets – further fanning the flames of tension. The economic stakes are high, as most sectors depend on the massive supply chains that bind the world’s two largest economies together.
To stabilize the growing tensions, the Phase One trade deal was signed in January 2020. Our agreement included strong requirements for major structural reforms and fundamental changes in the way China’s economy and trade regime are structured. The hope was to create a more equitable basis for trading and promote goodwill between the countries.
Current Developments and Implications
Since President Joe Biden took office, he has opted to maintain existing tariffs while implementing additional levies on certain goods. This ruling continues all of that pressure on China. Simultaneously, it shields American industries from what they see as unfair competition.
The Biden administration’s approach would indicate a continued commitment to holding China’s feet to the fire on its harmful trade practices. It raises questions about the long-term viability of these tariffs, especially as inflationary pressures mount in the United States.
With an eye on the 2024 election, Trump has promised to increase tariffs on imports from China. He intends to set rates up to 60%. This latest announcement indicates that the trade war is set to intensify even further if he does manage to reclaim the White House come January 2025. Economists are sounding the alarm over the potential for new tariffs. They urge that these steps not be taken, warning that they would do lasting damage to both economies.
“We have to be much more deliberate about the semiconductor supply chain,” – Jamieson Greer, US Trade Representative
Exemptions and Future Outlook
In response to increasing fears over supply chain disruptions, the US Customs and Border Protection took unprecedented measures. They issued similar guidance recently that odiously exempts certain items from tariffs. Specifically, smartphones, laptops, hard drives, flat-panel computer monitors and semiconductors have all gotten exemptions.
These exemptions are a positive step towards reducing the burden on American consumers and businesses that depend on technology imports from China. We appreciate the administration’s efforts to cut tariffs on critical supply chain items. This step would help critical industries of the US economy while updating our complicated trade relationship with China.
As things develop, TNC industry stakeholders are trying to remain focused. National lawmakers, too, have been watching closely the impact of a continuing trade war. Everyone is looking for evidence of a possible thawing of relations between the two countries. As a result, they hope this will provide for a more predictable economic climate.