Donald Trump's Trade War with China: Key Steps and Reactions.

1. Background and Initiation

Section 301 Investigation (August 2017)

The U.S. Trade Representative (USTR) investigated China’s practices concerning intellectual property (IP) theft, forced technology transfers, and trade deficits.

Findings (March 2018)

The USTR report concluded that China engaged in unfair trade practices, prompting President Donald Trump to announce a series of tariffs on Chinese imports.

2. Tariff Implementation

March 2018

Trump imposed 25% tariffs on $50 billion of Chinese imports, divided into two lists:

• List 1: $34 billion in tariffs applied in July 2018.

• List 2: $16 billion in tariffs applied in August 2018.

September 2018

• A 10% tariff was placed on an additional $200 billion worth of Chinese goods (List 3), which was later increased to 25% in May 2019.

September 2019

• 15% tariffs were imposed on $112 billion of goods (List 4A), later adjusted to 7.5% in February 2020.

Total Coverage

• Over $550 billion in Chinese goods were subjected to U.S. tariffs.

3. Chinese Retaliation

April 2018

• China imposed 25% tariffs on $50 billion worth of U.S. goods, targeting key industries such as agriculture (soybeans) and automobiles.

September 2018

• China implemented retaliatory tariffs on $60 billion worth of U.S. goods.

June 2019

• Additional tariffs were imposed, covering $185 billion of U.S. exports to China.

4. Negotiations and the Phase One Deal (January 2020)

Key Provisions

• China agreed to purchase an additional $200 billion worth of U.S. goods (including energy, agriculture, and manufacturing products) by 2021.

• China committed to improving intellectual property protections.

Outcome

• China fell short of its purchase targets, reaching only 58% of the agreed amount by December 2020, partially due to COVID-19 disruptions.

5. Tech Restrictions and Sanctions

Huawei (May 2019)

• The U.S. added Huawei to the Entity List, restricting its access to U.S. technology. Additional sanctions in 2020 further limited Huawei’s ability to acquire semiconductors.

ZTE (2018)

• Faced a $1.4 billion penalty for violating U.S. sanctions.

TikTok and WeChat (August 2020)

• Trump issued executive orders to ban transactions with these Chinese tech companies, but courts later blocked these measures.

6. Legislative and Policy Measures

FIRRMA (2018)

• The Foreign Investment Risk Review Modernization Act expanded the authority of the Committee on Foreign Investment in the United States (CFIUS) to scrutinize Chinese investments in sensitive sectors.

USMCA (2020)

• The trade agreement included clauses designed to deter member countries from forming free trade agreements with non-market economies, such as China.

Export Controls (2020)

• The U.S. imposed restrictions on semiconductor exports to Chinese firms, particularly SMIC (Semiconductor Manufacturing International Corporation).

7. Economic and Strategic Impact

Trade Deficit

• The U.S.-China trade deficit dropped from $419 billion in 2018 to $345 billion in 2019, though the COVID-19 pandemic significantly affected trade figures.

Consumer Costs

• A 2019 study found that tariffs increased annual costs for U.S. households by an average of $831.

Agriculture

• U.S. farmers were severely impacted by Chinese retaliatory tariffs, prompting the U.S. government to provide $28 billion in federal aid.

Global Supply Chains

• Many companies shifted production from China to other countries, such as Vietnam and Mexico, to avoid tariffs.

8. Broader Context

Strategic Shift

• The U.S. formally adopted a stance of viewing China as a strategic competitor, influencing policies in trade, technology, and military sectors.

WTO Disputes

• Both nations filed complaints with the World Trade Organization (WTO), but the U.S. blocked Appellate Body appointments, limiting dispute resolution effectiveness.

Currency Manipulation

• In August 2019, the U.S. labeled China a currency manipulator, though this designation was removed after the Phase One deal.

Conclusion

Trump’s trade war aimed to reduce trade deficits and counter China’s unfair practices, but the outcomes were mixed. While some objectives were achieved, tariffs led to increased costs for U.S. consumers and farmers, and China’s retaliation further strained economic relations. The Phase One deal had limited success, and tech sanctions marked a longer-term shift toward strategic competition. The trade war's legacy includes a reshaped global supply chain and a more confrontational U.S.-China dynamic that continues to influence trade and economic policies.