The U.S.-China Trade War (Episode 1)

By Eliana Svilik

06/06/21

This episode will cover the ongoing U.S. – China trade war, which former U.S. President Donald Trump began on 6 July 2018. China and the U.S. are the world’s two largest economies, and this economic conflict has become the largest trade war since 1975. Currently, the U.S. is enforcing high tariffs on $370B worth of Chinese products. Before we dive into the actual trade war, let’s go over a bit of background on the Chinese economy.

In recent decades, China has reinvented itself and become an economic powerhouse through a unique blend of communism and capitalism. China’s economy is dependent on state-owned enterprises that act as social stabilizers, “private” Chinese companies that are monitored and regulated by the government, and foreign corporations. One of its main goals has been establishing itself as a world superpower to rivel and eventually surpass the United States. Due to China’s political system, which grants the federal government enormous power without any real checks or balances, Beijing exerts unrivaled authority over Chinese citizens, companies, and even transnational corporations operating in China.

Ultimately, this would lead to the trade war, which the Trump administration instigated with the intent to boost the U.S. economy and decrease the amount of American technology “stolen” by the Chinese government. The trade war was supposed to give a competitive edge to domestic products and services as well as increase the number of jobs. It was also meant to decrease imports from China and reduce the U.S. trade deficit, which in 2020 amounted to $310.8B with China. With regards to the second goal, American companies have long struggled to protect their intellectual property from China. Over 80% of economic espionage cases investigated by the U.S. involve China. China steals American IP in a variety of ways and through numerous programs, ranging from actual espionage to policies that leave foreign companies vulnerable to technology theft. Legally, China requires that foreign companies partner with a domestic company if they want to sell their goods on the domestic market, making them susceptible to trade secret theft. Once china, which works directly with private individuals and companies to steal IP, has the technology, it manufactures and sells whatever the product is on the Chinese domestic market before “displacing” US companies in the global market. The trade war was supposed to mitigate Chinese policy and force China to address IP theft in a meaningful way.

The Trump administration negotiated the Phase One trade deal, which was signed January 15, 2020, with the Chinese government. The deal resulted in China agreeing to criminalize some forms of IP theft and amend certain policies that require U.S. companies to essentially hand over their technology. However, the terms are quite vague. Furthermore, according to the agreement, China must increase its exports of U.S. goods and services by at least $200B over the span of 2020 and 2021 based on 2017 numbers. Critics have said that this is an unreasonable target. China has not yet met the goal and COVID-19 has made it even more difficult as demand for U.S. goods dropped.