What You Need To Know About The U.S./China Trade War

Open trade has been seen as a win-win for the U.S. and China, but according to recent findings from David Autor (a leading empirical economist at MIT) - that’s not always the case. For example, China’s rapid economic growth from a backward economy resulted in a 40 percent decline in manufacturing in the United States between 2000 and 2007. 

The ongoing trade war, which began in January of this year when President Trump placed a 30 percent tariff on foreign solar panels from China (the world leader in solar panel manufacturing), has recently escalated to over 1,300 categories of Chinese imports. China, in retaliation, imposed tariffs on 128 products it imports from America.

The U.S. economy has appeared resilient to the trade war, while China’s economy is showing signs of softness. U.S. stocks have risen about 10 percent, while Chinese equities have dropped more than 16 percent, according to Fortune.

However, the strength of the U.S. economy could be a reflection of limited tax cuts – a substantial effect. 

“The U.S. would be different if trade (i.e., buying and selling) was hindered between the states. It would be harder to have a variety of food with each state producing its own cars, furniture and so on, it would be hard to be very efficient,” economist William Goffe said. “China has carried out policies that most people agree are unfair and inappropriate, such as demanding intellectual property from foreign firms that manufacture goods there."

The United States Trade Representatives found that, “Chinese theft of American IP currently costs between $225 billion and $600 billion annually.”

In the latest tit-for-tat, the United States announced on Monday that it will impose tariffs on another $200 billion in Chinese imports and China responded by saying it was adding tariffs on $60 billion in American goods.

China Daily Reporter, Yiru Xu, thinks the trade war is by all means bad for China. “The latest tariffs from both sides show that China is running out of options, because it failed to come up with the equivalent level of retaliation,” Xu said.

It's been nine months since the trade war started, and neither of the administrations seem to be backing down.