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The Unwinnable Trade War

Everyone Loses in the U.S.-Chinese Clash—but Especially Americans

Paying the price: at a Black Friday sale in Niles, Illinois, November 2018 Gurinder Osan / AP

In late June, the leaders of China and the United States announced at the G-20 meeting in Osaka, Japan, that they had reached a détente in their trade war. U.S. President Donald Trump claimed that the two sides had set negotiations “back on track.” He put on hold new tariffs on Chinese goods and lifted restrictions preventing U.S. companies from selling to Huawei, the blacklisted Chinese telecommunications giant. Markets rallied, and media reports hailed the move as a “cease-fire.”

That supposed cease-fire was a false dawn, one of many that have marked the on-again, off-again diplomacy between Beijing and Washington. All wasn’t quiet on the trade front; the guns never stopped blazing. In September, after a summer of heated rhetoric, the Trump administration increased tariffs on another $125 billion worth of Chinese imports. China responded by issuing tariffs on an additional $75 billion worth of U.S. goods. The United States might institute further tariffs in December, bringing the total value of Chinese goods subject to punitive tariffs to over half a trillion dollars, covering almost all Chinese imports. China’s retaliation is expected to cover 69 percent of its imports from the United States. If all the threatened hikes are put in place, the average tariff rate on U.S. imports of Chinese goods will be about 24 percent, up from about three percent two years ago, and that on Chinese imports of U.S. goods will be at nearly 26 percent, compared with China’s average tariff rate of 6.7 percent for all other countries.

The parties to this trade war may yet step back from the abyss. There have been over a dozen rounds of high-level negotiations without any real prospect of a settlement. Trump thinks that tariffs will convince China to cave in and change its allegedly unfair trade practices. China may be willing to budge on some issues, such as buying more U.S. goods, opening its market further to U.S. companies, and improving intellectual property protection,

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