US President Donald Trump will meet his Chinese counterpart Xi Jinping in Argentina this weekend at the G20 summit, where they are expected to discuss the frosty trade relationship between the two countries.
While experts remain hopeful that both countries could resolve their contentious tie and, as a result, lower the tariffs currently affecting more than half of all trade between the two countries, some fear the two countries will remain with no end in sight.
How did we get here?
In January 2018, President Trump placed a 30 per cent tariff on foreign solar panels, to be reduced to 15 per cent after four years. China, the world leader in solar panel manufacturing, decried the tariffs.
that China had forced US companies to transfer their intellectual property to China as a cost of doing business there. He further imposed a 20 per cent tariff on washing machines for the first 1.2 million units imported during the year. In 2016, China exported US$425 million worth of washers to the United States.
In March, in "a response to the unfair trade practices of China over the years", President Trump asked the United States Trade Representative (USTR) to investigate applying tariffs on over 1,300 categories of Chinese goods, worth US$50-60 billion, including aircraft parts, batteries, flat-panel televisions, medical devices, satellites, and various weapons.
China responded by imposing tariffs on 128 products it imports from the US, including aluminium, aeroplanes, cars, pork, and soybeans, with a 25 per cent tariff, as well as fruit, buts, and steel piping, with a 15 per cent tariff. Three days later, Trump responded by saying that he was considering another round of tariffs on an additional US$100 billion of Chinese imports.
He also accused Beijing of requiring technology transfer from private US companies to Chinese state-owned entities, through regulations related to foreign investment and joint venture operations.
President Donald Trump with China's President Xi Jinping during their bilateral meeting at the G20 Summit, Saturday, Dec. 1, 2018 in Buenos Aires, Argentina. Source: AP Photo/Pablo Martinez Monsivais
China "unfairly controlling imports"
Further, China was also alleged to have by imposing different standards for private, foreign companies and Chinese State Owned companies. For example, China was accused of limiting both the type and number of companies authorised to carry out international transactions, as well as discriminating against foreign goods in government procurement.
The most recent round of tariffs imposition occurred in September, when the US announced a 10 per cent tariff on $200 billion worth of Chinese goods, increasing to 25 per cent by the end of the year. In response, China promptly imposed a 10 per cent tariff on $60 billion of US imports.
So far, China has either imposed or proposed tariffs on US$110 billion of US goods, while the United States has imposed or proposed tariffs on US$250 billion of Chinese goods. The two countries have implemented tariffs on US$360 billion worth of goods flowing between the two countries.
warned that allowing the tariffs to remain in place for an extended period of time would seriously damage the US economy, while US companies have warned that the tariffs are harming their businesses.
If Xi and Trump are unable to reach a deal, the two countries would enter what some experts have called an
Ice breaking vs Cold War
White House economic adviser Larry Kudlow said on Wednesday that Trump was on US-China trade irritants but was ready to hike tariffs on Chinese imports if there was no breakthrough.
Mr Kudlow said Trump had told advisers that "in his view, there is a good possibility that a deal can be made, and that he is open to that".
President of the US-based Population Research Institute, Steven Mosher, believes that China and the US would soon reach a temporary accommodation. In a statement, he said that, with all domestic economic indicators heading south, Beijing is increasingly desperate to make a deal.
The deal, as Mr Mosher predicts, would commit Beijing to reduce its trade surplus with the US according to some mutually agreed-upon timetable. It would be relatively easy for China to act on this commitment, by ordering state-owned companies to purchase more American goods and services.
“We can already see the outlines of such an agreement in Trump’s 2017 demand that China reduces the trade deficit by $200 billion by 2020,” Mr Mosher said, “China countered with an offer of $70 billion earlier this year. Although this was rejected by Washington as insufficient, odds are that in Buenos Aires or soon thereafter, Trump and Xi will meet in the middle.”
“While such an arrangement is exactly the opposite of free trade, it is the most likely outcome—at least as long as China is under the control of a one-party dictatorship that does not share the free world’s values and institutions,” Mosher commented.
"A Band-Aid fix"
However, some experts are relatively pessimistic, believing that the Trump-Xi meeting in Argentina will produce little if any results.
Stewart Patrick, a senior fellow at the , said the G20 meeting “offers the prospect of a band-aid fix at best".
"Investors hope the leaders will dampen the mutually hurting trade war, but the two sides remain far apart, as evinced by the failure of the APEC summit to agree on a final communique," he said.
“China has not fundamentally altered its unfair, unreasonable, and market-distorting practices,” US Trade Representative Robert Lighthizer declares, while Vice President Mike Pence warns that the United States is prepared to more than double its tariffs."
Beijing, on the other hand, calls U.S charges “groundless” and “totally unacceptable” and remains intent on pursuing its “Made in China 2025” agenda.
“Given current mistrust, even a truce seems unlikely,” Mr Patrick added.
The China-US Trade War: a timeline
January 22: US placed a 30 per cent tariff on foreign solar panels, to be reduced to 15 per cent after four years.
January 22: US placed a 20 per cent tariff on imported washing machines.
March 22: President Trump asked the USTR to investigate applying tariffs on US$50-60 billion worth of Chinese goods, including aircraft parts, batteries, flat-panel televisions, medical devices, satellites, and various weapons.
April 2: China responded by imposing , including aluminium, airplanes, cars, pork, and soybeans (which have a 25 per cent tariff), as well as fruit, nuts, and steel piping (15 per cent).
April 5: President Trump considered another round of tariffs on an additional $100 billion of Chinese imports if Beijing retaliates.
May 29 / June 15: The White House announced a with "industrially significant technology", from which $34 billion would start on July 6.
July 6: China's Commerce Ministry accused the United States of launching a trade war and said China would respond in kind with similar tariffs for US imports.
July 11: the White House declared that the United States would impose additional if China retaliated against these U.S. tariffs, and was set to be implemented within 60 days.
China retaliated almost immediately, threatening its own tariffs on $50 billion of US goods.
August 8: the United States published its finalised list of 279 Chinese goods, worth $16 billion, to be subject to a 25 per cent tariff from August 23.
August 23: China responded with its own when the American tariffs were implemented.
September 17: the US announced its would begin on September 24, increasing to 25 per cent by the end of the year. They also threatened tariffs on an additional $267 billion worth of imports if China retaliates.
September 18: China responded with 10 per cent tariffs on $60 billion of US imports.
