The Current U.S. Trade War with China

I write about the current U.S. trade war with China in order to try to make sense of the incomprehensible. Will we ever again have an amiable agreement? Will a standoff lead to a global recession? Will tariffs lead to an economically stronger China globally as Moira Weigel suggests?

In 2000, as the People’s Republic of China (PRC) prepared to enter the World Trade Organization (WTO), the U.S. Congress voted to extend China’s Permanent Normal Trade Relations (PNTR). This meant that the Chinese state-run economy received preferential tariff treatment under U.S. law, opening the door for the mass influx of products made in the communist nation. A quarter of a century later there is a complete reversal

The United States-China Economic and Security Review Commission was created in 2000. The Commission’s 2024 Annual Report to Congress Summary states:

"Under the leadership of General Secretary Xi Jinping, the Chinese Communist Party (CCP) continued to pursue a technology-focused strategy to drive rapid military modernization, expand internal political surveillance and suppression of dissent, and assert China’s political and economic agenda in the international arena.... Although Xi has consistently emphasized the importance of small and medium-sized enterprises in providing jobs and accelerating innovation, the data show that the CCP’s post-COVID policies have strengthened the position of state-owned enterprises (SOE)s."

"China is reinforcing its longstanding, market-distorting approach of massive subsidies to targeted industries, this time focusing on high-tech manufacturing in order to unleash “new quality productive forces” and generate more earnings through its exports and traditional dumping approaches. Designed to strengthen self-sufficiency and achieve global dominance in key sectors - including but not limited to advanced and legacy semiconductor chips, aviation, advanced batteries, robotics, and artificial intelligence - China’s strategy is also intended to integrate it more deeply into global supply chains and continue to increase every other country's dependence on it for a wide array of goods and materials."

"As the United States and its partners move to further curb access to military and dual-use technologies and address China’s blatant disregard for global norms and international agreements, China is shifting production overseas to circumvent restrictions while expanding its own access to critical minerals, markets, key enabling technologies and tools, and labor. Because its subsidized goods undercut foreign competitors, China’s approach comes at the expense of both advanced and emerging economies."

The 2024 Report recommended that "Congress repeal Permanent Normal Trade Relations (PNTR) for China. The PNTR status allows China to benefit from the same trade terms as U.S. allies, despite engaging in practices such as intellectual property theft and market manipulation." Instead, by executive order President Trump entered into a trade war on "Liberation Day" (April 2, 2025) imposing and quickly excalating tariffs on China, which retaliated in kind. Meanwhile some smaller countries were trying to make a deal with Trump. Later that week the stock market plunged.

The New York Times quoted Trump saying on Tuesday night, April 8, 2025, that global leaders were coming to him “kissing my ass” in search of deals.. But "a rapid rise in government bond yields, caused Mr. Trump to blink and on Wednesday afternoon pause his “reciprocal” tariffs for most countries for the next 90 days leaving a 10 percent tariff rate in place for most countries while increasing tariffs on China to 125 percent. Trump met with Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Kevin Hassett, the director of the National Economic Council. 'They discussed with the president the 10-year Treasury yield, emphasizing concern about the health of the broader U.S. financial system.'

Robert Reich explains the importance of the rise of Treasury note rates. New York Times global economics correspondent Peter Goodman notes on April 13, 2025: "Shocked by Trump’s trade war, foreign investors are selling U.S. government bonds, long the world’s safe haven. Investors buy U.S. Treasury bonds on the assumption that, come what may, the federal government will endure... Last week, the yield on the closely watched 10-year Treasury bond soared to roughly 4.5 percent from just below 4 percent — the most pronounced spike in nearly a quarter century. At the same time, the value of the American dollar has been falling, even as tariffs would normally be expected to push it up."

US stocks got crushed on Thursday, April 10, 2025, pulling back from the previous day's historic rally amid concerns that President Trump's broad trade offensive has become a direct confrontation with China. Next, cell phones, chips and laptops get a reprieve from tariffs as China hiked its tariffs on US goods to 125%.

What a ride the first two weeks in April 2025! Inflation and stagnation are likely to be part of an uncertain future.

This video below gives a perspective of U.S.-China Relations two years ago under the Biden administration. by Foreign Policy Association.