The trade war between the United States and China, which has roots tracing back to China's entry into the World Trade Organization (WTO) in 2001, has reignited with renewed vigor. The conflict intensified as the US imposed a 10% tariff on Chinese goods, alongside 25% levies on Canadian and Mexican imports, effective from February 1. This move was met with swift retaliation from China, which announced a series of tariffs on US exports, further escalating tensions between the two economic giants.
China's ambitious industrial policy, "Made in China 2025," unveiled over a decade ago, has been a point of contention for the US. Aimed at establishing supremacy in key sectors of the 21st century, this blueprint has prompted the US to adopt protective measures. In response to the new tariffs, China has implemented 15% tariffs on US coal and Liquefied Natural Gas (LNG), as well as 10% duties on crude oil, farm equipment, large-displacement vehicles, and pickup trucks.
Analysts suggest that the US strategy of imposing lower tariffs on China compared to Canada and Mexico indicates a calculated plan by former President Trump to set the stage for future trade negotiations.
“I wouldn’t say Trump went easy on China by just having 10 per cent tariffs. He worked out deals with Canada and Mexico to pause their tariffs, but the tariffs on China went ahead as planned, and he has said multiple times that additional tariffs are forthcoming,” – Michael Cunningham
Michael Cunningham from the Asian Studies Center at the Heritage Foundation believes that Trump's actions signal a serious intent to negotiate with Beijing.
“Doing so sends a message that he’s serious, which gives him negotiating leverage, without getting too far ahead of his team’s ongoing review of US-China trade that presumably will help inform future tariff plans,” – Michael Cunningham
The Trump administration's rationale for these tariffs stems from grievances over forced technology transfers, cyber theft, and China's failure to uphold its trade commitments. Despite potential diplomatic overtures, tensions between the two nations are expected to persist. China is currently preparing an initial proposal for trade negotiations, which may involve reviving the "Phase 1" deal signed by Trump and Chinese President Xi Jinping in 2020. This proposal could potentially be presented this week, coinciding with a scheduled call between the two leaders.
Barbara Weisel suggests that President Trump remains open to striking a deal with President Xi, although the ongoing tariff exchanges may continue for some time.
“Trump has made clear he is prepared to make a deal with Xi, with whom he believes he has a special relationship, although the tit-for-tat may go several rounds,” – Barbara Weisel
The US-China relationship's adversarial nature complicates other countries' confidence in US trade policy. The stakes have escalated, with national security considerations now surpassing economic factors in trade policy decisions. The US has expanded its chip restrictions beyond China to include other nations, further restricting China's access to advanced technology.
Mike McCurry, former White House Press Secretary under President Clinton, acknowledges the difficulties in dealing with China compared to other nations.
“I think this was all a bluff. Canada and Mexico basically did what they were already doing but saw it in their interest to let Trump take a victory lap. Dealing with the Chinese will be trickier,” – Mike McCurry
The possibility of a prolonged US-China tariff war hinges on China's willingness to engage in negotiations.
“Ultimately, whether we will see a prolonged US-China tariff war may depend more on whether China is interested in playing Trump’s game. China could choose to test how little it can offer to buy Trump off or, instead, up the ante exerting its own leverage on the US.” – Barbara Weisel
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