In 2017, China constituted almost half of the total US trade deficit, partly contributing to the US’s domestic debt crises as well as creating a sense of unease among its citizens. As a consequence, it prompted the US government to declare a trade war against China. Moreover, the US-China trade war can also stem from a strategic motive for Donald Trump in his presidential run. As a part of Trump’s core pledges during his campaign to resolve the standing trade deficit, the trade war seems to be incumbent in procuring midterm election votes for the current US president. Last but not least, alongside economic and political incentives, this act of warmongering may also be an attempt at regaining global economic preeminence over the Chinese government.
Regarding its economic impacts, the US-China trade war proves to be detrimental to both parties. On the one hand, by imposing tariffs, the US would experience substantial losses in terms of economic welfare. These include a considerable increase in imported commodities’ prices, business uncertainties, and more expensive exports due to retaliatory tariffs from China. On the other hand, China faces the risk of a downward trend in economic growth owing to the suppression of the country’s exports to the US and $35 billion export deficit in the US market. Meanwhile, on a global scale, other countries have taken advantage of the gap left by China in the US market. Vietnam is a prime example of a beneficiary, as an increase in exports to the US has returned $2.6 billion to our economy.
After months of disputes, China and the US have finally made the Phase One agreement a reality. This agreement, nevertheless, covers only the tip of the iceberg as more thorough negotiations over the US-China trade relationship are needed. The deal emphasizes the importance of eliminating intellectual property theft and forced technology transfers. It has also agreed on a cut in some US tariffs in exchange for a rise in China’s purchases of American goods. However, the deal is labeled as only hypothetical, mostly attributed to the lack of enforcement. It is an open question as to how the two nations with such few amiable records can guarantee to keep these promises.