• Madison Ianniello

Legacy of the Trade War – Lasting Impact on U.S.-China Relations


By Emily Brignand

 

The trade war was projected to be a failure from the start. An initially punitive tariff that sought to drive China to change its unfair economic policies, and incentivize American manufacturers to ramp up production by easing external competition, resulted in long-term economic repercussions that ultimately failed its promise to serve American citizens. Although the trade war had seemed to come to an end in January of 2020 when the U.S. and China signed the Phase One trade agreement, the legacy of the war has extended to the Biden Administration: most tariffs have remained the same, there are no intentions to resume the previous high-level bilateral economic relationship, and the trade deal has yet to address fundamental issues. To avert another economic hit to the U.S. economy, prevent history from repeating itself, and gain more effective tactical strategies that serve our interests, the U.S. must consider alternative approaches to form a better relationship with both China and its allies.

Before the trade war, the U.S. and China established a bilateral relationship when the two governments issued a joint communiqué that instituted full diplomatic relations in the 70s. This decision was a watershed as China underwent a deep reform under Deng Xiaoping’s Reform and Opening. By prioritizing economic development through incrementalism and reliance on Foreign Direct Investment, China introduced itself to the world economy and entered a bold new phase of breaking away from isolationism and opening to all countries. This even led to China’s entry into the World Trade Organization (WTO). The U.S. wanted to take advantage of this opportunity by granting China permanent normal trade relations (PNTR) that lowered tariffs to encourage more trade and strengthen economic ties between the states. But the intention to impose influence on China through the U.S.’s embrace of their growth did not come true in reality. Even though the U.S. and China have been economically intertwined and interdependent, China’s successful persistence in pursuing self-oriented goals has threatened the global status of the U.S.

Tariffs do not serve the national interest, economically or diplomatically. President Trump claimed trade wars were “good and easy” to win without any knowledge of the implications of one. Contrary to the aim of his “America First” foreign policy doctrine, the effects of tariffs forced American consumers to pay higher prices without actually protecting domestic jobs. While the American people believed the trade war was solely a financial advantage that supposedly benefited them, the downfall of the crisis showed the weakness in fighting a unilateral “Cold War” with a noncomprehensive plan. China’s persistent retaliation proved it was a misconception that China would back down to U.S.’s escalation.


When the U.S. imposed tariffs on China’s imported goods, it sent a message by placing economic pressure to propel change of some sort. But this message is not worth pursuing when the burden of the tariffs is felt mostly only by American citizens and only a tiny amount on Chinese manufacturers. Meanwhile, China diverted its trade flows by lowering tariffs for other trading partners, increasing trade surplus by building better partnerships with other states through this opportunity. So not only did the trade war cause long-term damage to the U.S. economy, but it has also made the relationship with China even more strained and uncertain. To recover from the economic loss of the COVID-19 pandemic while simultaneously moving forward with the diplomatic tensions carried over from the trade war, the Biden Administration must restore strength and build more cooperative relationships among our allies and China.


The underlying issue the Biden Administration must hone in is the political competition between the two powers embedded in the argument over economic policies. The trade war was not simply economics alone — politics, rivalry, and nationalism have been the driving force of the economic vehicle. Now that China has risen to be the second-largest economy, the focus has shifted from a purer economic argument to a muddier, multifaceted debate of priorities. However, if there is anything trading has proved, it is that it boosts reflective comparative advantages that benefit all parties involved. China’s ability to become economically developed signifies that free-market ideology is successful. Yet, China will always be viewed as a competitor, threat and rival so long as U.S. government officials remain in distributive bargaining.


Unlike the protectionist attitude of the Trump Administration, which took pride in its zero-sum approach, China has long held an integrative bargaining tactic that strives for cooperation. During the entirety of the trade war, the push and pull between the U.S. and China always followed China's response to U.S.’s aggressive measures. As opposed to the anti-China sentiment in the U.S. during the height of the pandemic, the Chinese government “did not blame the U.S. for the ongoing crisis and has even cracked down on online commentary calling the virus U.S.-made biological weapon,” according to Jessica Chen Weiss, a professor at Cornell University. Despite China’s positive efforts and contributions, many people in the U.S. from both parties align with the convenient sentiment of U.S.-China relations as a win-lose, take-it-or-leave-it situation, exacerbating the already challenging crises and misunderstandings between the two states. Their negative frame of mind omits room for negotiation and leads to a more uneven relationship. However, if the U.S. does not attempt to meet in the middle with China, then countries like Russia will. Because China is interest-oriented rather than ideology-based, it will leave the U.S. in an even worse place than it is today. Plus, China has signaled its willingness to work on mutual interests by pursuing excellence “and not killing off a rival.”


Suppose the U.S. is persistent in inflicting pain on China due to their lack of commitment to the Phase One trade agreement. In that case, the U.S. must, at least, cooperate with other countries to collectively place tariffs on China. Instead of a unilateral force with an already-foreseeable defeat lying ahead, collectively placing tariffs with partners that have increased their purchases from China puts ample pressure on China to reconsider its economic policies. Moreover, it would also benefit the U.S.’s foreign diplomatic outlook by removing protectionist measures from Trump’s administration and working closely with other countries again. Nevertheless, rather than continuing tariffs and assembling a competitive strategy, the Biden Administration should take on a more cooperative role in conducting economic relations with China.


Other dire concerns the U.S. should prioritize in its economic relations with China are humanitarian and environmental factors. The Russia-Ukraine War serves as a reminder for the U.S. to navigate its relations with China carefully. Instead of focusing on China’s lack of recognition of Russia’s fault and responsibility for the invasion, it is more productive to maintain open lines of communication between the U.S. and China to avoid any misunderstandings that could pull them farther apart. To avoid further dependency between Russia and China, the U.S. needs to focus on the common ground of calling for peace — whether that is to help end the war through diplomacy or strategic alliance. The last thing the U.S. and the world want is Russia and China’s transactional relationship to develop a deeper partnership.


The most probable and exigent cause is the alliance between the U.S. and China — the two biggest polluters — to combat the climate crisis. They must take action to reduce their carbon emissions and counteract their carbon footprint by supporting global environmental projects. Early efforts have included drafting a new international agreement to phase out coal and fossil fuel subsidies. However, the U.S. must take more steps to prove its commitment to fighting climate change. Now is a pivotal moment for the U.S. and China to help build global climate resiliency. China has pledged to reach carbon neutrality by 2060 and has taken reliable steps, such as deploying solar and wind power and electric cars. To defy international skepticism after Trump’s abandonment to fight climate change, it is more crucial than ever for the U.S. to engage in environmental advocacy and commitments.


The legacy of the trade war depends on the Biden Administration and its policymakers. Although lessening or exempting previously imposed tariffs on Chinese goods might be unpopular to the American public, promoting trade is essential to both the U.S. economy and foreign policy. As a service economy that depends on exports and investments, it is foolish and counterproductive to continue Trump’s protectionist policies and expect China to return to market production-focused industries. The Biden Administration should take on a cooperative, negotiable role in dealing with economic relations with China and other countries. In the end, imposing tariffs on imported goods with hopes to change other parties’ course of action would only escalate the crisis, increase diplomatic tension, and hurt American citizens. Although negotiating and rebuilding the relationship with China is a challenging task given the political polarization, it is essential that the Biden Administration demonstrates the importance of seeking cooperation, compromise and co-existence with China.