The US-China trade war is an economic conflict between the United States and the People’s Republic of China. Both countries have been engaged in this conflict since 2018. To be more specific, the administration of President Donald Trump announced on 5 July 2018 that it would push through with its threat to impose tariffs on Chinese products worth USD 34 billion.
China retaliated the following day with an announcement of similarly sized tariffs on American goods. Both the American and Chinese governments have since been imposing additional tariffs, raising trade barriers further, and exchanging tirades.
Explaining the Causes of the US-China Trade War
Economic Policy Based on Protectionism
For several decades, Western economies such as the United States have been struggling to counteract the explosive growth of the Chinese economy. The rise of China as an economic powerhouse has disrupted the global trading system and threatened the positive trajectories of Western countries.
The tariffs imposed and trade barriers raised by the American government collective demonstrate an economic policy based on protectionism. Proponents believe that protectionist measures protect the producers and laborers from different domestic industries and sector from foreign competitors.
According to Peter Navarro, an American economist serving as the director of the White House Office of Trade and Manufacturing Policy, the actions of the Trump administration hurdled toward China are purely defensive measures aimed at protection and promoting the economic and overall national interest of the U.S.
He explained further that aside from the fact that Americans are transferring trillions of dollars overseas through the consumption of imports, countries are using their earnings from exports to buy assets in the U.S. He argued further that it would be better for the American economy if people are spending their money to support domestic products and investments.
Concerns Over Foreign Investments and Entries
There is also an issue about the restrictive foreign investment policies of the Chinese government. The Trump administration has also cited this as one of the main factors or reasons behind the US-China trade war. Note that China restricts the entry of foreign companies in the Chinese market since the administration of former paramount leader Deng Xiaoping.
Under the Xiaoping policy, foreign companies are restricted from entering specific industries or sectors in China, such as the automotive industry, unless they establish a joint venture with a Chinese company. The venture involves having the Chinese counterpart as the majority owner and giving it rights to use the intellectual properties of their foreign counterpart.
Even the European Union believes that the foreign investment policies of China violated a World Trade Organization ruling that requires fair treatment of domestic and foreign companies. The policies essentially compel foreign companies to transfer their intellectual properties to Chinese companies to receive a government approval.
China has plans to ease restrictions against foreign investors. On 15 March 2019, for example, the Chinese Congress passed a new foreign investment law designed to lessen the requirements for foreign entrants. Yukon Huang, a senior fellow in Carnegie Asian Program, explained that law is a statement of intentions that are broadly responsive to the foreign business community.
Allegations of Chinese Espionage and Misconduct
Another primary cause of the US-China trade war involves allegations of Chinese industrial and political espionage of American government officials, businesses, academics, and other organizations. In 2017, then National Security director Keith B. Alexander called Chinese industrial espionage as “the greatest transfer of wealth in history.”
There are also specific allegations accusing China of using Chinese companies as vehicles to spy on the United States. As an example, the national defense bill passed by the U.S. Congress in August 2018 barred the American government from purchasing equipment from Huawei and ZTE due to allegations that the Chinese government was using these companies to spy on other countries.
In June 2019, the U.S. government announced 23 criminal charges against Huawei and its chief financial officer Wanzhou Meng. These charges were related to national security, commercial theft, wire fraud, and obstruction of justice.
The U.S. Department of Commerce also included Huawei and 70 other foreign subsidiaries and affiliates to its Entity List, thus blacklisting the company and banning U.S. companies from doing business with them without a government license.
FURTHER READINGS AND REFERENCES
- Bureau of Industry and Security. 2019, May 21. “84 FR 22961: Addition of Entities to the Entity List.” Federal Register: The Daily Journal of the United States Government. Available online
- CNBC. 2018, March 15. “Peter Navarro Talks Trade and Tariffs.” CNBC. Available online
- Huang, Y. 2019, March 19. “China’s Foreign Investment Law and US-China Trade Friction.” Carnegie Endowment for International Peace. Available online
- Lee, T. B. 2018, August 14. “New Law Bans US Government from Buying Tech From Chinese Giants ZTE and Huawei.” Ars Technica. Available online
- Rogin, J. 2012, July 9. “NSA Chief: Cybercrime Constitutes The ‘Greatest Transfer of Wealth in History.” Foreign Policy. Available online
- Whitaker, M. G. 2019. “Acting Attorney General Matthew Whitaker Announces National Security Related Criminal Charges Against Chinese Telecommunications Conglomerate Huawei.” Justice News. U.S. Department of Justice. Available online