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0 White Paper on the Business Environment in China

1.2 Current US-China Trade Conflict

Phase One Deal trade talks, was notably silent leading up to the
signing (Lynch).
The US and China has been in a tit-for-tat
tariff war that has dragged on for nearly This modest accord cannot disguise how
two years. The current US-China trade conflict has the world’s most important relationship is at
seen increased exports in both countries, but at a its most perilous juncture since before Richard
much slower pace. Despite these challenges, China Nixon and Mao Zedong re-established links
continued to be important to US economic growth, five decades ago. The two sides used to think
supporting millions of jobs. China remains a top they could both thrive; today each has vision of
market for US goods exports, with only Canada success in which the other lot falls behind. The
and Mexico buying more goods. It was also the roots of the superpower split go back 20 years.
third-largest market for US services exports, after When China joined the World Trade Organization
the United Kingdom and Canada. Cruising between in 2001 reformers at home and friends abroad
6 to 6.5 percent, China’s 2019 gross domestic dreamed that it would liberalize its economy
product (GDP) growth numbers remain a driver and, smoothing its integration into an American-
of global economic growth. Political priorities are led world order. That vision has died. The West
likely to maintain that this pace through 2020, has faced a financial crisis and turned inward.
but lingering structural challenges, ballooning China’s behavior has improved in some ways: its
debt, and uncertainties brought by trade conflict giant trade surplus has fallen back to 3 percent
continue continued into 2020 (Liu). of GDP. But with every emerging great power,
China’s hankering to exert its influence is growing
As of this writing, the White House has along with its stature. It wants to be a rule-setter
signed off on a swap of US tariff reductions in in global commerce, with sway over information
return for China spending US$50 billion on US flows, commercial standards and finance.
farm goods, tightening its intellectual property President Donald Trump has responded with a
protections. and opening its financial services policy of confrontation that has won bipartisan
markets. The agreement has been referred to support in America. Yet the China hawks
as “Phase 1” as negotiations are expected to be cramming Washington agencies and corporate
ongoing for the near future. The limited accord boardrooms share no consensus over whether
caps a roller-coaster negotiation that brought America’s goal should be the mercantilist pursuit
the two countries to the brink of success more of a lower bilateral trade deficit, the shareholder-
than once, only to see talks stall. Diplomats driven search for profits in American-owned
from the world’s two largest economies were subsidiaries in China or a geopolitical campaign
working against a Sunday deadline, when new US to thwart China’s expansion. Meanwhile, Mr Xi
tariffs on US$160 billion in Chinese goods were fluctuates between grim calls for national self-
scheduled to take effect. That increase now will reliance one day and globalization the next, while
not go forward and existing tariffs on US$360 the European Union is unsure if it is an estranged
billion in Chinese imports will be reduced. American ally, a Chinese partner or an awakening
The deal includes provisions that will penalize liberal superpower in its own right. The EU has
the Chinese government if it fails to place the restricted Chinese investment even as Italy has
required agricultural orders. China’s Commerce joined China’s belt-and-road trade scheme. China
Ministry, which usually releases news about the spent 2019 promising to open its big, primitive

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