Amid the polluted river of toxic jabber that floods our major American media channels, a leviathan has awakened. Beneath the static noise now streaming across network airwaves, we spy the United States and China snarled in an increasingly volatile trade tussle. Two of the world’s great superpowers dramatically squaring off, east against west presumably inching toward a high-stakes 21st century tech war.
In addition to a decline in manufacturing and stalling production, perhaps the greatest impact might be felt by a rising tide that soon splashes and soaks American consumers. The collateral damage potentially severe. President Donald Trump’s trade war with China has already shaken consumer sentiment and rattled global financial markets. A new analysis from Bank of America Merrill Lynch suggests it could hit consumer spending next.
While Chinese-based business feels the fiscal pain, certain companies are taking extreme actions, even filing for a change of address abroad as they surely know profit margins can only decrease at this rate. Besides that we must note the considerable gap in cost of labor. It has narrowed a bit, however this area continues to skew in China’s favor.
Yet mounting evidence clearly shows that each nation has already begun to suffer the ill effects of a sagging economy. As present indications have widely suggested, there is a quickly growing sense we actually may be witnessing a protracted conflict in its evolutionary process. Let us take a look back in order to expose the root of this current dispute. Plus track each significant step that led us on such a perilous path.
An opening strike having targeted the U.S. trade imbalance was delivered by a then-aspiring Republican presidential candidate Donald Trump in June, 2016. Trump lays out plans to counter unfair trade practices from China at a rally in Pennsylvania. He also threatened to apply tariffs under sections 201 and 301 of U.S. trade legislation, which he subsequently did.
The next year saw that deficit amount leap to $375 billion, as China incredibly would export over half a trillion dollars worth of wares to American soil. Whereas they imported just $130 billion total valued freight from the U.S. in return.
As a result President Trump inked a pair of executive orders regarding national trade policy. Both written in late March 2017, merely two months into his term. One calls for tighter tariff enforcement in anti-subsidy and anti-dumping trade cases. The other orders a review of U.S. trade deficits and their causes.
A week after that Trump would have a formal introduction with China’s leader Xi Jinping at his luxury Palm Beach, Florida property Mar-A-Lago. Where they officially agreed on a Comprehensive Economic Dialogue (CED) program. Along with the preliminary 100-day plan of action. Those agreements renewed hope for more beneficial trade relations in the future.
But once the original time frame had lapsed that July, they were still unable to find common ground. The President abandoned any pretense while making a determination that acrimony trumps diplomacy in this case. Trump orders “Section 301” probe into alleged Chinese intellectual property theft, described as his first direct trade measure against Beijing. Section 301 refers to the part of a 1974 trade law that lays out how the United States should enforce its rights under trade agreements.
A grievous point of contention in the view of Trump and his crew. U.S. Trade Representative Robert Lighthizer unfortunately got saddled with that regrettable task.
As the calendar switched to 2018, the White House effectively cranked the heat up on Beijing. On January 22, Trump levied so-called global safeguard tariffs on foreign imports of solar panels beginning at 30% and 20% for washing machines. This decision took effect in February. While Trump set additional taxes on international steel and aluminum imports in March, with exceptions made for Canada and Mexico.
Then on March 22, Trump endorsed an executive memorandum consisting of three mandates: First, extend the range of items imported from China to be incorporated under new tariffs. Second, the U.S. would register a complaint with the World Trade Organization about China. The United States has requested WTO consultations with China concerning certain Chinese measures which the US alleges are inconsistent with China’s obligations under the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). The request was circulated to WTO members on 26 March. A third command expressed the need to limit U.S. financial interests within select information technology fields connected to China.
Premier Xi and co then replied in similar fashion by applying their own stiff tariffs. At the beginning of April, the Chinese government placed a series of taxes on various American goods. The Finance Ministry in Beijing declared those duties on everything ranging from food products to raw materials. That lineup covered 128 commodities to start with an estimated value of $3 billion.
One day later the Office of the U.S. Trade Representative released an expanded list adding as much as 25% in appended tariffs on another $50 billion in domestic imports. So China swiftly countered them and matched the staggering sum. Trump and his administration stayed steadfast in their approach as they simultaneously maintained diplomatic efforts to keep the lines of communication open. Nearing the end of 2018, a virtual economic cease fire was called in December. That brief pause for a period of 90 days.
Most recently the battle lines were drawn between trans global tech giants Google and Huawei. As the Menlo Park, CA monolith pulled the proverbial plug on their former partner, a multinational corporation from Shenzhen. Since Trump ceased American collaboration with that Chinese firm, unless granted a special exemption licensed by the U.S. government. A devastating blow that explicitly blocked the overseas wireless colossus from access to Google’s acclaimed Android operating system. A measure further impeding the desired goal for them of gaining world cellular market control.
Beyond that, little progress was achieved in the beginning of 2019. A string of talks held in Washington and Beijing this spring proved to be unsuccessful. As April gave way to May, news wire service Reuters reported that China had backtracked on almost all aspects of a draft U.S.-China trade pact.
Which leaves us deadlocked right here. Stuck in a very dangerous game. Who is going to blink?
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