The origin story . . .
The Trump administration released an official report in March 2018 framing its issues with China: a ballooning trade deficit of US$425B, unfair trade practices, intellectual property theft, and forced technology transfer. These claims were earlier aired by Trump on the campaign trail and over Twitter, but they are also part of a longstanding and concerted effort from the nationalist side of the Republican Party to reverse what they see as extreme globalist policies by previous administrations.
Non-stop escalation . . .
The U.S. imposed the first round of tariffs, penalizing US$34B worth of Chinese imports into the U.S. in July 2018. The rates ranged from an additional 10 to 25 per cent, and specifically targeted sophisticated manufacturing products in the telecommunications sector, along with computer circuit boards and processing units. Since then, the U.S. has imposed four more rounds of tariffs against Chinese products, reaching a whopping US$450B. The U.S. has promised even more in the coming months, with a significant hike to 30 per cent tariffs on specific Chinese products.
China’s response . . .
China did not blink. It responded immediately with tariff retaliations of exactly the same amount during the first two rounds. The target was agricultural products originating from counties where Trump got the most support during the 2016 presidential election. Chinese President Xi Jinping, however, decided to be the adult in the room, slowing down the pace of his retaliatory measures by September 2018. The move was part of a strategy to keep trade deal negotiations on track, but was overshadowed by an escalation in tariffs and mutual mistrust. The G7 last week confirmed that perception, since Trump announced a Chinese rapprochement that never actually happened. China now has decided to play the long game and to stop trying to negotiate until after next year’s U.S. presidential election.