February 23, 2019 –
On February 7, President Trump said that he would not meet with President Xi Jingping of China before an increase in tariffs set for March 2. How did the U.S. and China get to this point, and what will the scheduled tariff increases mean for both nations?
The conflict began on August 18, 2017, when U.S. Trade Representative Robert Lighthizer, in response to a memorandum from the Office of the President, initiated a Section 301 investigation to determine whether or not China was engaging in unfair trade practices in violation of the Trade Act of 1974. The results of the investigation, released on March 22, 2018, concluded that the Chinese government was guilty of forcing the transfer of technology from U.S. firms operating in China to their Chinese business partners. The investigation also found China guilty of discriminatory licensing restrictions and other intellectual property violations.
The U.S. vowed to assess harsh penalties on China, in the form of 25 percent tariffs on approximately $50 billion worth of Chinese imports. The first set of tariffs took effect on July 6, 2018 (affecting $34 billion worth of imports, including many popular electronic items) with additional tariffs put in place on August 23, 2018 (affecting another $16 billion worth of goods that included bicycles, appliances, roofing materials, car tires, and handbags). The Chinese government retaliated by assessing its own trade penalties on U.S. exports, placing 25 percent tariffs on agriculture and food products originating in the U.S., including soybeans, dairy, and pork.
By the end of September, the tariff war escalated even further, when the U.S. announced a new list of tariffs on approximately $200 billion worth of Chinese imports. The new tariffs started at a rate of 10 percent and were set to automatically increase to 25 percent on January 1, 2019, if the Chinese government did not take action to reverse their unfair trade practices. Once again, China responded with additional tariffs of their own, affecting $60 billion worth of U.S. exports. President Trump responded by threatening to assess higher tariffs on another $267 billion worth of Chinese goods that had not yet appeared on the previous lists.
The volley of tariff announcements finally came to a halt on December 1 last year, when President Trump and President Xi Jinping met at the G-20 summit in Buenos Aires and agreed to suspend any further escalation of the trade war for a period of 90 days. The terms of the truce allowed for the two countries to negotiate with one another, moving the previous deadline for an automatic increase to 25 percent tariffs from January 1 to March 2.
Representatives from the U.S. and China continued to meet this week in Washington to discuss an agreement that would end any further escalation of penalties, and perhaps allow for rollbacks of the current tariffs. World stock markets are anxiously awaiting the results of negotiations between the two countries, and China’s state-run press is stressing the importance of reaching a compromise. While some analysts have expressed cautious optimism, others remain skeptical that the U.S. will be able to achieve any meaningful change in China’s business practices.
An article published by the nonpartisan Brookings Institution in October last year examined unfair trade practices by China and evaluated tariffs as a means of dealing with them. The conclusion was that reflexive, back-and-forth tariff increases will not remedy these issues, and will ultimately hurt both countries. According to the authors, “the tariffs applied by the two countries… will cause dislocations, raise costs, and increase uncertainty. Their value lies in the possibility that they will force the other side to make concessions, or at least deter it from even worse behavior. If that doesn’t happen—if neither side capitulates to the other’s demands—the tariffs will prove to be costly, mutual mistakes.”
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This article originally appeared in the February 23, 2019 issue of Wide Angle, our regular newsletter designed, we hope, to inform rather than inflame. Each edition brings you original articles by Common Ground Solutions, a quiz, and a round-up of news items — from across the political spectrum — that we think are worth reading. We make a special effort to cover good work being done to bridge political divides, and to offer constructive information on ways our readers can engage in the political process and make a difference on issues that matter to them.
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