The world’s leading superpowers are locking horns. Game on here, trade war between the US and China is here. Over the past 16 months, America and China have been trading blows... ...through tariffs on goods. We are looking at a reality that has a 25% tariff on every single product... ...that would come in from China. The impact is being felt on industries worldwide. But what is the story behind the America-China trade war? So the trade war, what have you guys been looking at? The US doesn’t like that China is growing so fast... ...and set to overtake America as the biggest economy in the world... ...if it hasn’t already by certain measures. Basically, China and the US are caught in this race... ...of imposing tariffs on each other. So the US slaps a high tariff on certain products, then China retaliates. It’s multiple industries across multiple markets, it’s huge. And I think right now would be a really good time to look at what’s happened... ...how it could impact the world from now on.

At The Economist, we’ve been covering the trade war extensively. Soumaya Keynes is our trade and globalisation editor, based in Washington, DC. How did this whole trade war kick off? How did this whole trade war start? For a long time, there have been frustrations that past American administrations had with the Chinese. On the 2016 presidential campaign trail, you started to see some really tough rhetoric. We can’t continue to allow China to rape our country, and that’s what they’re doing. And so, he gets into office, his United States Trade Representative, that’s the kind of official trade negotiator. They’re working on this big report. So, they’re essentially investigating China’s economic practices. Essentially, the question they’re asking is, has China done anything that would frustrate America’s economic interests? And they find, surprise, surprise—yes. How long a history is there of these complaints the US has about China? These concerns go back for a really long time. And I think to understand them properly...

...you really need to go way back to the expectations that people had... ...when China was thinking about entering the World Trade Organisation. China’s economic rise has been dramatic. In 1978, China’s GDP at market prices was just 6% of America’s. Last year, it had grown to 66%. When considering local spending power... ...China has already overtaken America. This unprecedented growth began with President Deng Xiaoping. He started opening up China’s economy to the world in 1978... ...and the country quickly became “the world’s factory.” Over the next decade, exports as a share of GDP tripled... ...and by 1988, 15% of China’s exports went to America. The World Trade Organisation opened its doors to China in 2001. And it was America that ushered it in. Bringing China into the WTO is a win-win decision. It will protect our prosperity and it will promote... ...the right kind of change in China. After joining the WTO, China became an economic superpower.

But people had expected the country to also become more like a Western capitalist economy. That didn’t happen. America now claims that China achieved its growth by not playing fair. Are those claims justified? To find out the answer, I spoke with David Rennie. He’s our Beijing bureau chief. There are two ways in which China certainly hasn’t been playing fair. One way is just that China treats Chinese companies differently. So, if you are a Western business, your Chinese competitor not only has better market access, but maybe the land that it built its factory on was given for free, maybe it got a giant tax break. China just doesn’t have a level playing field. There’s then the really dirty stuff: stealing foreign companies’ technology. If you asked Chinese officials about the accusation that China is stealing its way to the top, they will say, well hang on, America steals secrets too. So why are you coming after us? The American government will tell you sure, they spy and they steal stuff.

...but never for commercial purposes. With Donald Trump’s election in 2016... ...you had a president who actually set about getting tough with China... ...once he was in office, and we never really had that before. The Trump administration has been using tariffs... ...or taxes on imported goods... ...to try to force the Chinese to change their ways. In July 2018, America imposed tariffs of 25%... ...on $34bn worth of Chinese products. That almost doubled the average tariff rate on Chinese imports... ...from 3.8% to 6.7%. And it’s American firms that have to pay that tax. But with every increase from America, came an increase from China. Since the start of the trade war... ...China has more than doubled its average tariff rate. America’s has tripled. The fight has become overtly political... ...because China’s tariffs are hitting President Trump’s voter base. Many counties where Trump won in the 2016 election were here... ...in the Great Plains...

...and these are the counties most affected by China’s tariffs. Someone who knows all about the impact... ...tariffs are having beyond the data... ...is Chad Bown from the Peterson Institute for International Economics. He’s been analysing international trade for decades... ...but the trade war has put his research in the spotlight. Some people have referred to it as my World Cup or my Super Bowl. It’s something I’ve been studying in the background for 20 years. And now all of a sudden the world seems to be interested in this. What role do tariffs play in a trade war? Tariffs are basically a tax... ...but it’s a tax that’s only paid for goods that are produced... ...outside of the country, in a specific place. One of the things that China has done in its tariffs is... ...it’s imposed really high tariffs on American exports of soybeans. This is a huge product that farmers in Iowa and across the Midwest... ...grow only to sell to China. So, how are these tariffs and...

...the trade war impacting the wider world economy? I think at some level we’re seeing the decisions that businesses make... ...be affected by this. Nowadays, they’re not sure what markets are going to be open to them... ...in the future, and that’s going to impact their investment decisions. The International Monetary Fund, the IMF... ...they expect economic growth to be a lot lower in the future... ...because of the tensions arising during the trade war. The global economy is slowing down... ...and everybody’s increasingly concerned about that. As things stand now, a ceasefire in the trade war could be drawing near. The two leaders are hoping to agree on a “phase one” deal soon... The two leaders are hoping to agree on a “phase one” deal soon... ...which could mean some tariffs being lifted. The Trump administration wants China to buy more American produce... ...and tighten up their intellectual property rules. If that phase one deal is signed... ...will it be the beginning of the end of the trade war?

I took that question back to Soumaya. The Americans are hugely ambitious for the kinds of changes... ...that they would want from the Chinese but... ...those ambitions I don’t think will be reflected... ...in the preliminary phase one deal. The Chinese government wants its economy to do well... ...wants its citizens to get richer. The extent that the Americans persist in demanding these big changes... ...to the Chinese economy, it’s going to be really difficult to get a deal. Even if there is a phase one deal... ...there will be a lot of issues still to be resolved. But there’s more to the trade war than just tariffs. America has also imposed restrictions on some Chinese firms... ...especially ones in the tech industry. We cannot allow any other country to outcompete the United States... ...in this powerful industry of the future. Specifically over one Chinese company Huawei can offer cheaper prices... ...because they are heavily subsidised by the Chinese government. We’ve made another film that looks closely at Huawei...

...and why the West is worried about it. It includes a rare interview with Huawei’s CEO Ren Zhengfei. I do not really understand America’s political motivation. And we looked into how these tensions will impact American industries... ...already dependent on Huawei technology. The biggest issue, I think, with all of this political turmoil... ...surrounding the Huawei name is uncertainty. You can watch the Huawei film right now by clicking on the link opposite. If you want to learn more about the trade war, you can click the other link... ...where you’ll find all the research we used to make this film... ...as well as other articles we’ve written... ...including a special report by David Rennie. And as always, if you like what you saw, hit that subscribe button.

America v China: why the trade war won't end soon

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