Forget the trade deficit. The trade war is part of a larger U. S. backlash against China’s rise.
After four months of negotiation and tit-for-tat threats, Trump’s trade war on China finally broke out on July 7, when a 25 percent tariff began to be levied on $34 billion worth of Chinese goods. But the story does not stop here. The U. S. administration has threatened another $200 billion worth of Chinese imports with a 10 percent tariff.
On the surface, the trade war was directly initiated with a U. S. Trade Representative (USTR) investigation into China’s theft of U. S. companies’ intellectual property. However, a deeper examination reveals a much more complex picture. As early as January of 2018, when the IP theft problem had not fully come to the media’s attention, the Trump administration imposed a 30 percent tariff on imported solar panels, which were mostly made in China. In February, the U. S. Commerce Department initiated investigations on pipe fittings imported from China and anti-dumping duties went into effect. Two weeks later, China’s aluminum foil faced the same fate. These measures eventually led to Trump’s biggest tariff declaration in March. Since then, tension between the world’s two largest economies has escalated, leading up to the start of the trade war in July.
While some observers have dismissed Trump’s trade war as “ insane ” or “ crazy,” it’s important to look beyond such simple characterizations and consider why Trump launched a trade war targeting China at this moment.
First, the context. Historically, the United States has used Section 301 against China five times previously. Each time, the investigation led to a trade dispute, but all five earlier disputes were eventually resolved without resorting to a trade war. Meanwhile, the trade deficit between the United States and China has existed for very long time. What’s more, the trade deficit between the two countries might not be as huge as some claim. According to Oxford Economics, the overall U. S. trade balance with China, as a share of GDP, has remained relatively stable since 2009.
