One of the most important points raised during the Presidential campaign by Donald Trump
was the trade imbalance with China and its effects on the economy of the United States.
United States and China have been each other’s largest trading partners for decades. The
United States became the largest trading partner of China in 1998, while China became the
largest trading partner of the United States in 2015 with a total trade figures reaching 500
billion dollars (The Washington Post, July 6, 2018). However, such large-scale trade relations
led to a very unbalanced trade relationship with the United States facing major trade deficit
with China. At the beginning of the trade war, the trade deficit that the United States shared
with China was around 419 billion dollars (NPR, 2019). Trump had also argued that the
structure of the Chinese economy helped in keeping the commodity prices lower making it
difficult for the American manufacturers to compete. Another important concern was the
forced technology transfers from the American companies investing in China. Since
assuming the office of the President of the United States, Donald Trump has adopted a very
aggressive stance on the trade issue with China. It was no surprise that in 2018 Trump
announced massive additional tariffs to goods imported from China. If one has to put a time
line to the beginning of this trade war, it can be January 2018. One of the primary questions
asked in relation to the ongoing trade war between the United States and China is why the
United States increased the tariffs on the goods imported from China. The most obvious
answer is that it raises the price of imported good and forces the American people to buy
American products. It also aims to make the market space more equal by increasing the
prices of the Chinese commodities. Tariffs are also an important negotiation tool in the
ongoing trade war (BBC, May 14, 2019). Since it was adopted, the trade war has started to
affect more and more sectors and countries. China and the United States have attempted to
negotiate a solution but have continuously failed to reach a common ground. Given this
background, the paper will attempt to look at the various developments since the trade war
started and also try and attempt the factors that are preventing any quick and acceptable
solution.
Overview
The initial hints of trade war began with the United States imposing tariffs on solar panels
and washing machines in January 2018. Trump imposed around 30% tariffs on the solar
panels for first year with a plan to reach half of this by the end of the fourth year. In addition,
he imposed 20% tariffs on the first 1.2 million imported washing machines and the added
imports facing around 50% tax and parts facing 50% tariffs (The Washington Post, January
22, 2018). In July 2018, Trump decided to impose heavy tariffs after looking into the Chinese
trade and intellectual property practices under Section 301 of the Trade Act (South China
Morning Post, December 2, 2018). The total amount of tariffs imposed was around 34 billion
dollars (The Washington Post, July 6, 2018). In continuance with this, the United States
imposed further tariffs of 16 billion dollars in August and then 200 billion dollars in
September 2018. These tariffs from the United States have been matched by the Chinese side
by Beijing imposing tariffs of about 110 billion dollars and the 25% tariffs on soybean
imports (South China Morning Post, December 2, 2018). In the words of ShiYinhong, who is
an international relations scholar from Renmin University, “In essence, the trade war is not
about the trade surplus. It’s a US effort to change how the Communist Party runs the nation’s
economic activities at home and abroad” (South China Morning Post, June 11, 2019). The
United States has been consistently demanding that Beijing should undertake concrete
measures to address the issues such as protection of US intellectual property rights,
prevention of the existing cyber theft of American trade secrets, and work toward ending the
forced technology transfers to China from US industries (Reuters, May 7, 2019). In May
2019, the United States and China held a round of negotiations to reach a consensus, which
