China–United States trade war

The China–United States Trade War (simplified Chinese: 中美贸易战; traditional Chinese: 中美貿易戰; pinyin: Zhōngměi Màoyìzhàn) is an ongoing economic conflict between the world’s two largest national economies, China and the United States. The conflict, initiated by president of the United States Donald Trump, has been characterized by increasing tariffs and other trade barriers with the goal of forcing China to make changes to what the U.S. says are "unfair trade practices". Among the trade practices and their effects which the U.S. claims are unfair, are the growing trade deficit, the theft of intellectual property, and the forced transfer of American technology to China. Those, and other rationales for the tariffs, were explained in a government report published in March 2018.

Since the 1980s, Trump has frequently advocated tariffs to reduce the U.S. trade deficit and promote domestic manufacturing, saying the country was being "ripped off" by its trading partners, and imposing tariffs was a major plank of his presidential campaign. Although some economists and politicians argue that the United States' persistent trade deficit is problematic, many economists argue that it is not a problem,, and very few advocate tariffs as a solution, citing historical evidence that escalating tariff conflicts result in no winners.

In the United States, the trade war has brought struggles for farmers and manufacturers and higher prices for consumers. In other countries it has also caused economic damage, though some countries have benefited from increased manufacturing to fill the gaps. It has also led to stock market instability. The governments of several countries, including China and the United States, have taken steps to address some of the damage. The trade war has been criticized internationally; in the U.S., businesses and agricultural organizations have also been critical, whereas among politicians the response has been mixed.

The trade war has caused a significant deterioration in China–United States relations as the countries exchanged tit for tat tariffs for over a year, with Trump threatening more to come, with no resolution in sight.

Background

See also: China–United States relations, Economy of China, Economy of the United States, Intellectual property in China, and United States–China Relations Act of 2000

The rapidly increasing US trade imbalance with China

U.S. trade deficit (in billions, goods and services) by country in 2014

China and the United States are some of world's largest economies, ranked 1st and 2nd, in terms of GDP (PPP). China as the world's largest exporter and the United States as the world's largest importer. They have so far been important pillars for the global economy.

Formal diplomatic relations between the United States and the People's Republic of China were not established until 1979, and even afterwards, trade relations were hampered by the high tariff rates of the Smoot–Hawley Tariff Act of 1930. After the two governments settled asset claims dating from the Korean War in 1950, Congress temporarily granted China most favored nation status in 1980. However, Chinese-American trade was still hindered by the Jackson–Vanik amendment of 1974, which made trade with the United States contingent on certain human rights metrics. The Jackson–Vanik amendment enabled the president to issue an annual waiver, which were issued from 1980. However, this requirement was inconsistent with the rules of the World Trade Organization (WTO) that prohibit discrimination of members, so the United States opposed China’s membership of WTO.

By 1984, the United States had become China's third-largest trading partner, and China became America's 14th largest. However, the annual renewal of China's MFN status was constantly challenged by anti-Chinese pressure groups during US congressional hearings. For example, U.S. imports from China almost doubled within five years from $51.5 billion in 1996 to $102 billion in 2001. The American textile industry lobbied Congress for, and received, tariffs on Chinese textiles according to the WTO Agreement on Textiles and Clothing. In reaction to the 1989 Tiananmen Square protests' suppression, the Bush I administration and Congress imposed administrative and legal constraints on investment, exports, and other trade relations with China.

In 1991, China only accounted for 1% of total imports to the United States. The Clinton presidency from 1992 started with an executive order (128590) that linked renewal of China's MFN status with seven human rights conditions, including "preservation of Tibetan indigenous religion and culture" and "access to prisons for international human rights organizations"—Clinton reversed this position a year later. Other challenges to Sino-American relations in this decade included the Cox Committee investigations against supposed nonprofit involvement in "promoting communism", the persecution of Taiwanese-American scientist Wen Ho Lee for unproven allegations of espionage for the PRC, and the 1999 United States bombing of the Chinese embassy in Belgrade. But relations warmed after the September 2001 initiation of the War on Terror.

China joins the World Trade Organization

Main article: China and the World Trade Organization

For many years, China was the most important country which required an annual waiver to maintain free trade status. The waiver for the PRC had been in effect since 1980. Every year between 1989 and 1999, legislation was introduced in Congress to disapprove the President's waiver. The legislation had sought to tie free trade with China to meeting certain human rights conditions that go beyond freedom of emigration. All such attempted legislation failed to pass. The requirement of an annual waiver was inconsistent with the rules of the World Trade Organization, and for the PRC to join the WTO, Congressional action was needed to grant permanent normal trade relations (PNTR) to China. This was accomplished in 2000 with the United States–China Relations Act of 2000, allowing China to join WTO in 2001. China's most favoured nation (MFN) status was made permanent on December 27, 2001.

President Clinton in 2000 pushed Congress to approve the U.S.-China trade agreement and China’s accession to the WTO, saying that more trade with China would advance America’s economic interests: "Economically, this agreement is the equivalent of a one-way street. It requires China to open its markets—with a fifth of the world’s population, potentially the biggest markets in the world—to both our products and services in unprecedented new ways," said Clinton. In a speech in 2000, Clinton reiterated his hopes:

For the first time, our companies will be able to sell and distribute products in China made by workers here in America without being forced to relocate manufacturing to China, sell through the Chinese government, or transfer valuable technology—for the first time. We’ll be able to export products without exporting jobs.

As a new member, China agreed to rapidly lower import tariffs and open its markets, although many trade officials doubted it would stand by those promises. China did cut tariffs after it joined the WTO, but it nonetheless continued to steal U.S. intellectual property (IP) and forced American companies to transfer technology to access the Chinese market, which were violations of WTO rules. With tariffs, China lowered its average import tariffs to 10% by 2005 from the 40% it maintained in the 1990s.

In the four years after joining the WTO, China in general complied with many of its legal obligations, including passing laws and meeting deadlines. However, it was slow to enforce intellectual property rights and add transparency to its industrial rules and regulations, which made it difficult for U.S. businesses to access its market. By 2019 the estimated costs to the U.S. economy from Chinese IP theft was between $225 billion and $600 billion annually.

In 2005 Chinese exports to the U.S. increased 31 percent, but imports from the U.S. rose only 16 percent. And while the U.S. trade deficit with China was $90.2 billion in 2001, it nearly doubled by 2005.

By 2018, U.S. manufacturing jobs had decreased by almost 5 million since 2000, with the decline accelerating.

Hong Kong economics professor Lawrence J. Lau argues that a major cause is the growing battle between China and the U.S. for global economic and technological dominance. He argues, "It is also a reflection of the rise of populism, isolationism, nationalism and protectionism almost everywhere in the world, including in the US."

United States assertions

U.S. Secretary of Commerce Wilbur Ross meets with Chinese Minister of Industry and Information Technology Miao Wei, Beijing, September 2017

As president, Trump has asserted that China has "taken" hundreds of billions of dollars from the American economy each year because of unfair trade practices. Among those unfair trade practices is the theft of U.S. intellectual property (IP). James Andrew Lewis, senior vice president at the Center for Strategic and International Studies, claims that IP has been taken through espionage, theft and forced technology transfers due to mandatory joint ventures. Estimated cost to the U.S. from IP theft is between $225 billion and $600 billion annually.

U.S. trade representative Robert Lighthizer said that the value of the tariffs imposed was based on U.S. estimates of the actual economic damage caused by alleged theft of intellectual property and foreign-ownership restrictions that require foreign companies to transfer technology. Such forced Joint ventures give Chinese companies illicit access to American technology.

Over half of the members of the American Chamber of Commerce in the People's Republic of China thought that leakage of intellectual property was an important concern when doing business there. For example, American auto makers must establish a joint venture majority-owned by a Chinese partner, after which the Chinese company receives rights to use the American company's intellectual property in order to produce domestic product based on it.

Former director of the National Security Agency Keith B. Alexander called Chinese industrial espionage "the greatest transfer of wealth in history" and, in August 2017, Robert Lighthizer investigated China's alleged unfair trade practices.

Initiating steel and aluminum tariff actions in March 2018, Trump said "trade wars are good, and so easy to win," but as the conflict continued to escalate through August 2019, Trump stated, "I never said China was going to be easy."

Peter Navarro, White House Office of Trade and Manufacturing Policy Director, explained that the tariffs are "purely defensive measures" to reduce the trade deficit. He says that the cumulative trillions of dollars that Americans transfer overseas as a result of yearly deficits are then used by those countries to buy America's assets, as opposed to investing that money in the U.S. "If we do as we're doing . . . those trillions of dollars are in the hands of foreigners that they can then use to buy up America."

European Commission allegations

The European Commission filed a complaint with the World Trade Organization over these rules in 2018, arguing that foreign companies are forced or induced to transfer IP to their Chinese partner, and establish research and development in China, as "performance requirements" to receive government approval in sectors such as electric vehicles. The EU believes that this violates WTO rules requiring fair treatment of domestic and foreign companies.

China's response and counter-allegations

The Chinese government has denied forced transfer of IP is a mandatory practice, and acknowledged the impact of domestic R&D performed in China. Former U.S. treasury secretary Larry Summers assessed that Chinese leadership in some technological fields was the result of "huge government investment in basic science" and not "theft" of U.S. properties. In March 2019, the National People's Congress endorsed a new foreign investment bill, to take effect in 2020, which explicitly prohibits the forced transfer of IP from foreign companies, and grants stronger protection to foreign intellectual property and trade secrets. China had also planned to lift restrictions on foreign investment in the automotive industry in 2022. AmCham China policy committee chair Lester Ross felt that the draft text of the bill felt "rushed" and "broad", and also showed concern for a portion of the bill that grants the country power to retaliate against countries that impose restrictions on Chinese companies.

The Chinese government has blamed the American government for starting the conflict and said that U.S. actions were making negotiations difficult. They say the trade war has had a negative effect on the world and that the U.S. government's real goal is to stifle China's growth.

Chronology

White House National Trade Council Director Peter Navarro speaks on trade with Vice President Mike Pence and Commerce Secretary Wilbur Ross before the President signs Executive Orders regarding trade.

• January 22, 2018: Trump announced tariffs on solar panels and washing machines. About 8% of American solar panel imports in 2017 came from China. Imports of residential washing machines from China totaled about $1.1 billion in 2015.
• March 1, 2018: Trump announced steel and aluminum tariffs on imports from all countries. The United States had imported about 3% of its steel from China.
• March 22, 2018: Trump asked the United States trade representative (USTR) to investigate applying tariffs on US$50–60 billion worth of Chinese goods. He relied on Section 301 of the Trade Act of 1974 for doing so, stating that the proposed tariffs were "a response to the unfair trade practices of China over the years", including theft of U.S. intellectual property. Over 1,300 categories of Chinese imports were listed for tariffs, including aircraft parts, batteries, flat-panel televisions, medical devices, satellites, and various weapons.
• April 2, 2018: Ministry of Commerce of China responded by imposing tariffs on 128 products it imports from America, including aluminum, airplanes, cars, pork, and soybeans (which have a 25% tariff), as well as fruit, nuts, and steel piping (15%). U.S. commerce secretary Wilbur Ross said that the planned Chinese tariffs only reflected 0.3% of U.S. gross domestic product, and Press Secretary Sarah Huckabee Sanders stated that the moves would have "short-term pain" but bring "long-term success". On April 5, 2018, Trump responded saying that he was considering another round of tariffs on an additional $100 billion of Chinese imports as Beijing retaliates. The next day the World Trade Organization received request from China for consultations on new U.S. tariffs.

Chinese vice premier Liu He meeting with U.S. president Donald Trump in May 2018.

• April 4, 2018: Trump denied the existence of a trade war, saying "that war was lost many years ago by the foolish, or incompetent, people who represented the U.S." He added: "Now we have a trade deficit of $500 billion a year, with intellectual property (IP) theft of another $300 billion. We cannot let this continue."
• May 15, 2018: Vice Premier and Politburo member Liu He, top economic adviser to president of China and General Secretary Xi Jinping, visited Washington for further trade talks.
• May 20, 2018: Chinese officials agreed to "substantially reduce" America's trade deficit with China by committing to "significantly increase" its purchases of American goods. As a result, Treasury Secretary Steven Mnuchin announced that "We are putting the trade war on hold". White House National Trade Council director Peter Navarro, however, said that there was no "trade war," but that it was a "trade dispute, fair and simple. We lost the trade war long ago."
• May 21, 2018: Trump tweeted that "China has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products," although he later clarified the purchases were contingent upon the closure of a "potential deal."
• May 29, 2018: The White House announced that it would impose a 25% tariff on $50 billion of Chinese goods with "industrially significant technology;" the full list of products affected to be announced by June 15, 2018: It also planned to impose investment restrictions and enhanced export controls on certain Chinese individuals and organizations to prevent them from acquiring U.S. technology. China said it would discontinue trade talks with Washington if it imposed trade sanctions."
• June 15, 2018: Trump declared that the United States would impose a 25% tariff on $50 billion of Chinese exports. $34 billion would start July 6, 2018, with a further $16 billion to begin at a later date. China's Commerce Ministry accused the United States of launching a trade war and said China would respond in kind with similar tariffs for US imports, starting on July 6, 2018: Three days later, the White House declared that the United States would impose additional 10% tariffs on another $200 billion worth of Chinese imports if China retaliated against these U.S. tariffs. The list of products included in this round of tariffs was released on July 11, 2018, and was set to be implemented within 60 days.
• June 19, 2018: China retaliates, threatening its own tariffs on $50 billion of U.S. goods, and stating that the United States had launched a trade war. Import and export markets in a number of nations feared the tariffs would disrupt supply chains which could "ripple around the globe."
• July 6, 2018: American tariffs on $34 billion of Chinese goods came into effect. China imposed retaliatory tariffs on US goods of a similar value. The tariffs accounted for 0.1% of the global gross domestic product. On July 10, 2018, U.S. released an initial list of the additional $200 billion of Chinese goods that would be subject to a 10% tariff. Two days later, China vowed to retaliate with additional tariffs on American goods worth $60 billion annually.
• August 8, 2018: The Office of the United States Trade Representative published its finalized list of 279 Chinese goods, worth $16 Billion, to be subject to a 25% tariff from August 23, 2018: In response, China imposed 25% tariffs on $16 billion of imports from the US, which was implemented in parallel with the US tariffs on August 23, 2018:
• August 14, 2018: China filed a complaint with the World Trade Organization (WTO), stating that US tariffs on foreign solar panels clash with WTO ruling and have destabilized the international market for solar PV products. China stated that the resulting impact directly harmed China's legitimate trade interests.
• August 22, 2018: US treasury undersecretary David Malpass and Chinese commerce vice-minister Wang Shouwen met in Washington, D.C. in a bid to reopen negotiations. Meanwhile, on August 23, 2018, the US and China's promised tariffs on $16 billion of goods took effect, and on August 27, 2018, China filed a new WTO complaint against the US regarding the additional tariffs.
• September 17, 2018: The US announced its 10% tariff on $200 billion worth of Chinese goods would begin on September 24, 2018, increasing to 25% by the end of the year. They also threatened tariffs on an additional $267 billion worth of imports if China retaliates, which China promptly did on September 18 with 10% tariffs on $60 billion of US imports. So far, China has either imposed or proposed tariffs on $110 billion of U.S. goods, representing most of its imports of American products.
• November 10, 2018 - White House National Trade Council director Peter Navarro alleged that a group of Wall Street billionaires are conducting an influence operation on behalf of the Chinese government by weakening the president and the U.S. negotiating position, and urged them to invest in the rust belt.
• November 30, 2018: President Trump signed the revised U.S.–Mexico–Canada Agreement in Buenos Aires, Argentina. The USMCA contains an article 32.10 which aims at preventing any non-market economy, especially China, from taking advantage of the agreement. Jorge Guajardo, former Mexican ambassador to China said "One thing the Chinese have had to acknowledge is that it wasn't a Trump issue; it was a world issue. Everybody's tired of the way China games the trading system and makes promises that never amount to anything."
• December 1, 2018: The planned increases in tariffs were postponed. The White House stated that both parties will "immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft." According to the Trump Administration, "If at the end of [90 days], the parties are unable to reach an agreement, the 10 percent tariffs will be raised to 25 percent." The U.S. trade representative's office confirmed the hard deadline for China's structural changes is March 1, 2019:
• December 4, 2018: New York Fed president John Williams said that he believed the US economy will stay strong in 2019. Williams expects that increases in the interest rates will be necessary to maintain the economy. He stated, “Given this outlook of strong growth, strong labor market and inflation near our goal and taking account all the various risks around the outlook, I do expect further gradual increases in interest rates will best sponsor a sustained economic expansion."
• December 11, 2018: Trump announced China was buying a “tremendous amount” of U.S. soybeans. Commodities traders saw no evidence of such purchases, and over the next six months soybean exports to China were about one quarter what they were in 2017, before the trade conflict began. China reportedly considered purchases of American farm goods as contingent upon closing a comprehensive trade deal.
• May 5, 2019: Trump stated that the previous tariffs of 10% levied in $200 billion worth of Chinese goods would be raised to 25% on May 10. With notification by USTR, the Federal Register on May 9 published the modification of duty on or after 12:01 a.m. Eastern Time Zone May 10 to 25% for the products of China covered by the September 2018 action. The stated reason being that China reneged upon already agreed upon deals.
• May 15, 2019: Trump signed executive order 13873, which sought to restrict the export of U.S. information and communications technology to "foreign adversaries" under national security grounds. The order did not make any references to specific companies or nations, but it was heavily implied that the order was meant to support United States allegations of espionage via Chinese telecommunications firms.
• June 1, 2019: China will raise tariffs on $60 billion worth of US goods.
• June 29, 2019: During the G20 Osaka summit, Trump announces he and Xi Jinping agreed to a "truce" in the trade war after extensive talks. Prior tariffs are to remain in effect, but no future tariffs are to be enacted "for the time being" amid restarted negotiations. Additionally, Trump said he would allow American companies to sell their products to Huawei, but the company would remain on the U.S. trade blacklist. However, the extent of how much this plan to temporarily exempt Huawei from previous bans would be implemented later became unclear and, in the weeks later, there was no clear indication of the reversal of Huawei bans.
• June 29, 2019: After a meeting with Chinese leader Xi Jinping, Trump announces "China is going to be buying a tremendous amount of food and agricultural product, and they're going to start that very soon, almost immediately." China disputed making such a commitment and one month later no such purchases had materialized.
• July 11, 2019: Trump tweeted "China is letting us down in that they have not been buying the agricultural products from our great Farmers that they said they would." People familiar with the trade negotiations said China had made no firm commitments to purchase farm goods unless it was part of a comprehensive trade agreement.
• July 17, 2019: China announced an accelerated decrease in holdings of US treasury holdings, targeting 25% of its current holdings of $1.1 trillion.
• August 1, 2019: Trump announced on Twitter that additional 10% tariff will be levied on the "remaining $300 billion of goods".
• August 5, 2019: The central bank of China (PBOC) let the Renminbi fall over 2% in three days to the lowest point since 2008 as it was hit by strong sales due to the threat of tariffs.
• August 5, 2019: The U.S. Department of Treasury officially declared China as a Currency Manipulator, reportedly under personal pressure from Trump. In July 2019 the IMF found the yuan to be correctly valued, while the dollar was overvalued, and some analysts found that market forces, rather than Chinese intervention, had recently caused the yuan to lose value. China denied manipulating its currency, citing currency market reaction to Trump's announcement of tariff increases days earlier.
• August 5, 2019: China ordered state-owned enterprises to stop buying US agricultural products, totaling $20 billion per year before the trade war. Zippy Duvall, president of the American Farm Bureau Federation, called the move "a body blow to thousands of farmers and ranchers who are already struggling to get by," adding, "Farm Bureau economists tell us exports to China were down by $1.3 billion during the first half of the year. Now, we stand to lose all of what was a $9.1 billion market in 2018, which was down sharply from the $19.5 billion U.S. farmers exported to China in 2017."
• August 13, 2019: Trump delayed some of the tariffs. $112 billion worth will still take place on September 1 (which means that on September 1, $362 billion total worth, including the newly imposed $112 billion, of Chinese products will face a tariff), but the additional, not yet imposed, $160 billion will not take effect until December 15. Trump and his advisors Peter Navarro, Wilbur Ross and Larry Kudlow conceded the tariffs were postponed to avoid harming American consumers during the Christmas shopping season.
• August 23, 2019: Chinese Ministry of Finance announced new rounds of retaliative tariffs on $75 billion worth of U.S. goods, effective beginning September 1, 2019:
• August 23, 2019: Trump tweeted that he “hereby ordered” American companies to "immediately start looking for an alternative to China". Aides and analysts clarified that the tweet was without legal force. Furthermore, tariffs are to be raised from 25% to 30% on the existing $250 billion worth of Chinese goods beginning on October 1, 2019, and from 10% to 15% on the remaining $300 billion worth of goods beginning on December 15, 2019.
• August 26, 2019: At the G7 summit, Trump stated, "China called last night our top trade people and said ‘let’s get back to the table’ so we will be getting back to the table and I think they want to do something. They have been hurt very badly but they understand this is the right thing to do and I have great respect for it." Chinese Foreign Ministry spokesman Geng Shuang said he was unaware of such a call and Trump aides later conceded the call didn't occur but the president was trying to project optimism.
• August 28, 2019: Americans for Free Trade, an umbrella group for 161 trade associations across numerous industries, sent Trump a letter asking him to postpone all scheduled tariff increases. The next day, Trump said “badly run and weak companies are smartly blaming these small Tariffs instead of themselves for bad management."
• September 1, 2019: New USA and Chinese tariffs previously announced went into effect at 12:01 pm EST. China imposed 5% to 10% tariffs on one-third of the 5,078 goods it imports from America, with tariffs on the remainder scheduled for December 15. The United States imposed new 15% tariffs on about $112 billion of Chinese imports, such that more than two-thirds of consumer goods imported from China were then subject to tariffs.

Effects

In April 2018, China announced that it would eliminate laws that required global automakers and shipbuilders to work through state-owned partners. President of China and General Secretary Xi Jinping reiterated those pledges, affirming a desire to increase imports, lower foreign-ownership limits on manufacturing and expand protection to intellectual property, all central issues in Trump's complaints about their trade imbalance. Trump thanked Xi for his "kind words on tariffs and automobile barriers" and "his enlightenment" on intellectual property and technology transfers. "We will make great progress together!" the president added.

By early July 2018, there were negative and positive results already showing up in the economy as a result of the tariffs, with a number of industries showing employment growth while others were planning on layoffs. Regional commentators noted that consumer products were the most likely to be affected by the tariffs. A timeline of when costs would rise was uncertain as companies had to figure out if they could sustain a tariff hike without passing on the costs to consumers.

American farmers were particularly hard-hit by China's retaliatory trade actions. According to the American Farm Bureau, agricultural exports from the US to China decreased from $24 billion in 2014 to $9.1 billion in 2018, including decreases in sales of pork, soybeans, and wheat. Farm bankruptcies have increased, and agricultural equipment manufacturer Deere & Company cut its profit forecast twice between January and August 2019. In response to the difficulties faced by farmers, the Trump administration allocated $28 billion in relief, mostly in direct payments, in two tranches through July 2019. With the second $16 billion tranche, Trump tweeted, "Farmers are starting to do great again, after 15 years of a downward spiral. The 16 Billion Dollar China “replacement” money didn’t exactly hurt!" Trump stated that he would spend the tens of billions of dollars in tariffs from China to buy products from "Great Patriot Farmers" and distribute the food to starving people in nations around the world. According to an August 2019 USDA report, as American wheat exports "plunged", Canadian wheat exports "rocketed" from 32% to more than 60% of Chinese wheat imports during the most recent marketing year. Farm equipment manufacturers were negatively affected by the reluctance of farmers to invest in new equipment, with sales dropping significantly during the first quarter of 2019.

According to a January 14, 2019 article in the Wall Street Journal, despite US-imposed tariffs, in 2018 China's annual trade surplus was $323.32 billion, a record high. On February 6, 2018, The New York Times reported that in 2017 the trade deficit had also reached a record high. In March 2019, the U.S. Department of Commerce stated that in 2018 the U.S. trade deficit reached $621 billion, the highest it had been since 2008. According to a study by the National Retail Federation of the United States, a 25% tariff on Chinese furniture alone would cost US consumers an additional $4.6 billion in annual payments.

Analysis conducted by the Peterson Institute for International Economics found that China imposed uniform tariffs averaging 8% on all its importers in January 2018, before the trade war began. By June 2019, tariffs on American imports had increased to 20.7%, while tariffs on other nations declined to 6.7%.

Economic growth has slowed worldwide amid the trade war. The International Monetary Fund’s World Economic Outlook report released in April 2019 lowered the global economic growth forecast for 2019 from 3.6% expected in 2018 to 3.3%, and said that economic and trade frictions may further curb global economic growth and continue weaken the investment. According to Capital Economics, China's economic growth has slowed as a result of the trade war, though overall the Chinese economy "has held up well", and China's share of global exports has increased. U.S. economic growth has also slowed.

Analysis by Goldman Sachs in May 2019 found that the consumer price index for nine categories of tariffed goods had increased dramatically, compared to a declining CPI for all other core goods.

In August 2019, Trump trade advisor Peter Navarro asserted tariffs were not hurting Americans. Citing extensive evidence to the contrary, Politifact rated Navarro's assertion "Pants on Fire."

Surveys of consumer sentiment and small business confidence showed sharp declines in August 2019 on uncertainty caused by the trade war.

Stock market

Uncertainty due to the trade war has caused turbulence in the stock market.

On December 4, 2018, the Dow Jones Industrial Average logged its worst day in nearly a month as it declined nearly 600 points, to which some argue is in part due to the trade war.

On August 14, 2019 the Dow dropped 800 points, partly caused by increasing trade tensions between the U.S. and China. Nine days later, on August 23, the Dow dropped 223 points in five minutes after Trump "hereby ordered" American companies to immediately seek alternatives to doing business in China; and the Dow was down 623 points for the day.

Domestic politics

Analysts speculated that the trade war could affect the 2020 United States presidential election, as tariffs have negatively affected farmers, an important constituency for Trump. Xi may also face domestic political pressure.

Other countries

Globally, foreign direct investment has slowed. The trade war has hurt the European economy, particularly Germany, even though trade relations between Germany and China and between Germany and the U.S. remain good. The Canadian economy has seen negative effects as well. Several Asian governments have instituted stimulus measures to address damage from the trade war, though economists said this may not be effective.

Some countries have benefited economically from the trade war, at least in some sectors, due to increasing exports to the United States and China to fill the gaps left by decreasing trade between these two economies. Beneficiaries include Vietnam, Chile, Malaysia, and Argentina. Vietnam is the biggest beneficiary, with technology companies moving manufacturing there. South Korea has also benefited from increased electronics exports, Malaysia from semiconductor exports, Mexico from motor vehicles, and Brazil from soybeans. However, US-ASEAN Business Council CEO Alex Feldman warned that even these countries may not benefit long-term, saying that "It's in everyone's interest to see this spat get resolved and go back to normal trade relations between the US and China."

Reactions

Chinese domestic reactions

Communist Party newspaper People's Daily has stated that China will be able to withstand the trade war, and that Trump's policies are affecting American consumers.

Domestic reporting on the trade war is censored.

United States domestic reactions

Congress

Senate Democratic leader Chuck Schumer praised President Trump's higher tariffs against China's alleged taking advantage of the U.S. and said "Democrats, Republicans, Americans of every political ideology, every region in the country should support these actions." Other Democratic senators who supported Trump's actions include Bob Menendez, Sherrod Brown and Ron Wyden Bipartisan support from the House of Representatives for Trump's actions came from Nancy Pelosi and Brad Sherman Kevin Brady and Ted Yoho.

Other senators from both parties have criticized Trump for the trade war, including Charles E. Grassley, Tim Kaine, Mark Warner, Elizabeth Warren, and Ron Wyden.

Other Republican senators have given more measured statements. Mitch McConnell said that "nobody wins a trade war" but that there was hope the tactics would "get us into a better position, vis-à-vis China". John Cornyn said that "there's a lot of concern". Joni Ernst said in May 2019 that the "tariffs are hurtful" to farmers, but that they "do want us to find a path forward with China" and said, "We hope that we can get a deal soon".

U.S. industry

In 2018, following announcements of escalation of tariffs by the U.S. and China, representatives of several major U.S. industries expressed their fears of the effects on their businesses. Organizations critical of the intensifying trade war included Retail Industry Leaders Association. Several mayors representing towns with a heavy reliance on the manufacturing sector also expressed their concerns. In September 2018, a business coalition announced a lobbying campaign called "Tariffs Hurt the Heartland" to protest the proposed tariffs. as the tariffs on Chinese steel, aluminum, and certain chemicals contributed to rising fertilizer and agricultural equipment costs in the United States. A report by Logisym found that, despite the rising prices, demand for freight services increased and imports from China into the U.S. grew from US$38,230 million to US$50,032 million. Some commentators have noted that despite the fear of falling trade, increased imports and freight services signaled a growth of demand for goods from China.

Over 600 companies and trade associations wrote to Trump in mid-2019 to ask him to remove tariffs and end the trade war, saying that increased tariffs would have "a significant, negative, and long-term impact on American businesses, farmers, families, and the US economy".

On May 20, 2019, the Footwear Distributors and Retailers of America, an industry trade association for footwear, issued an open letter to President Trump, part of which read: "On behalf of our hundreds of millions of footwear consumers and hundreds of thousands of employees, we ask that you immediately stop this action", referring to the trade war.

In August 2019, Roger Johnson of the National Farmers Union — representing about 200,000 family farmers, ranchers and fishers — stated that the trade war was creating problems for American farmers, specifically highlighting the fall in soybean exports from the U.S. to China, elaborating, "instead of looking to solve existing problems in our agricultural sector, this administration has just created new ones. Between burning bridges with all of our biggest trading partners and undermining our domestic biofuels industry, President Trump is making things worse, not better.” In the same month, the American Farm Bureau Federation — representing large agribusiness — said that the announcement of new tariffs "signals more trouble for American agriculture."

Due to the trade war, Chinese investment needed by American aircraft manufacturer ICON Aircraft was cut in August 2019. This necessitated laying off 40% of the company workforce and cutting ICON A5 aircraft production to fewer than five aircraft per month, from a target of 20 aircraft per month.

Scott Paul, president of the Alliance for American Manufacturing, is a proponent of the increased U.S. tariffs. After China–US trade talks ended in July 2019 with no resolution in sight, Paul said the talks were "failing American workers," adding, "a regurgitated pledge to buy more ag products and more talks in September? Trump would have ripped any Democrat for that outcome..."

On CNBC's Mad Money, John Ferriola, the CEO and president of Nucor, America's largest steel producer and its largest metal recycler, argued that the tariffs were not unfair, but were "simply leveling the playing field." Ferriola added that not only the "European Union, but most countries in the world, have a 25 percent or greater VAT, (Value-added tax), on products going into their countries from the United States. So if we impose a 25 percent tariff, all we are doing is treating them exactly as they treat us." In the European Union, value-added tax is refunded only to manufacturers within a recognized VAT zone. European law does not recognize the U.S. income tax system as a VAT. Ferriola further claimed that even with the tariffs on steel, the cost of an average $36,000 car would go up about $160, less than half of 1 percent, while a can of beer would only cost an extra penny more.

Others

In an April 2018 article in Forbes, Harry G. Broadman, a former U.S. trade negotiator, argued that while the Trump administration's position that the Chinese do not abide by fair, transparent and market-based rules for global trade was broadly correct, employing unilateral tariffs is a self-defeating approach and the administration should instead pursue a coalition-based trade strategy. Through August 2019, The Washington Post factchecker counted 166 instances of Trump making assertions about the trade deficit noting that he was incorrectly characterizing the trade deficit with China which actually reflects more imports than exports.

Economic analyst Zachary Karabell has argued that the administration's tariff-based approach would not work as it would not "reverse what has already been transferred and will not do much to address the challenge of China today, which is no longer a manufacturing neophyte" and also argued that the assertion that more rigorous intellectual property protections would "level the playing field" was problematic. He recommended instead that the U.S. focus on its relative advantages of economic openness and a culture of independence.

The day Trump announced his steel and aluminum tariffs on imports from all nations, including China, the conservative, pro-business Wall Street Journal editorial board denounced the action as "the biggest policy blunder of his Presidency," adding, "This tax increase will punish American workers, invite retaliation that will harm U.S. exports, divide his political coalition at home, anger allies abroad, and undermine his tax and regulatory reforms."

Economists at financial firm Morgan Stanley expressed uncertainty about the how the trade war would end, but warned in June 2019 that it could lead to a recession.

The former Vice President Joe Biden said: "While Trump is pursuing a damaging and erratic trade war, without any real strategy, China is positioning itself to lead the world in renewable energy."

International

U.S. allies have warned Trump about escalating tariffs. At the 45th G7 summit, UK Prime Minister Boris Johnson said, "We don't like tariffs on the whole." European Council President Donald Tusk said the trade war risked causing a global recession.

On June 1, 2018, after similar action by the United States, the European Union launched WTO legal complaints against China's alleged forced ownership-granting and usage of technology that is claimed to discriminate against foreign firms and undermine the intellectual property rights of EU companies. They are allegedly forced to establish joint ventures in order to gain access to the Chinese market. The European commissioner for trade Cecilia Malmström said "We cannot let any country force our companies to surrender this hard-earned knowledge at its border. This is against international rules that we have all agreed upon in the WTO." American, European and Japanese officials have discussed joint strategy and taken actions against unfair competition by China. The 2018 G20 summit stated that the multilateral trading system "is currently falling short of its objectives... necessary reform of the WTO to improve its functioning."

See also

• 2019 Japan–South Korea trade dispute
• Anti-American sentiment in China
• Anti-Chinese sentiment in the United States
• Chinese espionage in the United States
• Congressional-Executive Commission on China
• Intellectual property in China
• United States–China Relations Act of 2000
• Protectionism in the United States
• Second Cold War
• Trump tariffs
• China–United States relations

Further reading

• Albuquerque, José Luiz, Antonio MArcelo Jackson Ferreira da Silva, and José Medeiros da Silva. "The China–US Trade War." Revista do Fórum Internacional de Ideias 9.1 (2019): 11+ online, a Brazilian perspective
• Boucher, Jean-Christophe, and Cameron G. Thies. "'I Am a Tariff Man': The Power of Populist Foreign Policy Rhetoric under President Trump." Journal of Politics 81.2 (2019): 712-722.
• Chong, Terence Tai Leung, and Xiaoyang Li. "Understanding the China–US trade war: causes, economic impact, and the worst-case scenario." Economic and Political Studies 7.2 (2019): 185-202. online, a historical perspective
• Crowley, Meredith A. (ed.), Trade War: The Clash of Economic Systems Endangering Global Prosperity (CEPR Press, 2019).
• Fenby, Jonathan, and Trey McArver. The Eagle and the Dragon: Donald Trump, Xi Jinping and the Fate of US/China Relations (2019)
• Lau, Lawrence J. The China–U.S. Trade War and Future Economic Relations (Hong Kong: The Chinese University of Hong Kong Press, 2019) online, a Hong Kong perspective
• Qiu, Larry D., Chaoqun Zhan, and Xing Wei. "An analysis of the China–US trade war through the lens of the trade literature." Economic and Political Studies 7.2 (2019): 148-168.
• Qiu, Larry D., and Xing Wei. "China–US trade: implications on conflicts." China Economic Journal (2019): 1-20.

External links

• Works related to The Facts and China’s Position on China–US Trade Friction at Wikisource
• Works related to China’s Position on the China-US Economic and Trade Consultations at Wikisource