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’s 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 soyabeans
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...
...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
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