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Evolution of the United States-China Trade War From Obama to Biden Administration

The article provides an overview of the Trade War between the United States of America and the People's Republic of China, specifically highlighting its evolution from President Obama's tenure to the current government in the USA led by Joe Biden. The article also covers the era of President Trump.


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Introduction


Harvard scholar Graham Allison (2015) sees the United States (US) and China’s relationship as a doomed and inevitable example of what is known in International Relations theory as the Thucydides’ Trap. In his classic work, Thucydides, a Greek historian, points out that the Peloponnesian War was a product of Sparta’s growing fear of Athens’ increasing power, which propelled the first to annihilate the rising hegemonic state before it became a proper threat. China’s President Xi Jinping acknowledged this rivalry in 2015, when he declared that the US and China’s relations were not in danger of falling into a Thucydides’ Trap, yet if other countries were to make strategic miscalculations, they could end up setting these traps for themselves (Allison, 2015).


The most significant clash between both powers has been the so-called US-China trade war, which matured and blossomed in the framework of the World Trade Organization (WTO). Created in January 1995 on the premise of the Marrakesh Agreement, the organisation’s role is to regulate and facilitate international trade, as well as foster trade negotiations and resolve trade disputes. Thus, it can act as an intermediary as well as a rule-maker, although resolutions are always to be supervised by the Member States. Consensus in the WTO is key, and that means that more often than not, reaching an agreement between all Member States can be a laborious task.


This article highlights and reviews the evolution of the trade war under the Obama, Trump, and Biden administrations. A conflict that was arguably one of the most talked about, it forcibly took a back seat with the Covid-19 outburst. However, the tense relations have never truly ended, and the purpose of this piece is to examine where they started, and also where they are now.


Background


China started transitioning from a planned to a market system in the early 1980s, with an initial reform stage that improved incentives and the scope of the market, and a following period in which institutionalisation took place, which would culminate in China’s acceptance into the WTO system (Qian, 2000, p. 2). Once this fifteen-year period finished, China’s WTO accession materialised in 2001, which was perceived as a positive move for the country, as it would facilitate China’s emergence in world trade and help ensure that the benefits reaped would be distributed broadly (Rumbaugh, 2004, p. 12-14).


However, the climate inside the WTO at the time of China’s accession was a bit hostile and stern. The Seattle Millennium Development Round in 1999 proved to be a failure for multilateralism, as a clear divide between North and South became clear from the start (Bleyer, 2000, p. 25). Developing countries had had enough of the wealthier nations’ agenda and system domination, prompting an unresolved round of negotiations amid civil society’s anti-liberal activism (Bleyer, 2000, p. 27). After Seattle, the WTO tried to resume negotiations two years later at the Doha Development Round, which was seen as a success in launching new negotiations by broadening the built-in agenda (Wolfe, 2003, p. 1). After Doha came the Cancún Round, and although the outcome was a failure overall (Langhammer, 2004, p. 4), the interesting part was seeing, for the first time, a coalition of emerging countries with emerging economies that put up a semi-strong front in the traditional states’ arena, the WTO. The G-21, the coalition’s name, was led by China.

All of these inconclusive negotiations only accelerated what would later on become crystal clear - an erosion of multilateralism, along with a surge of bilateral and regional trade deals, had begun (Polaski, 2006, p. 4).


The US-China Trade War Across Administrations


The Obama era: a tense background


The Obama administration’s trade policy towards China was marked by the fact that the Asian giant had started to look like a threat to regional stability from the US point of view (Larus & Hargis, 2017, p. 7). After an initial conciliatory and multilateralist approach taken by the US, tensions started to arise a few years after China’s WTO accession, and by 2008, the US knew that China was moving towards more restrictive trade actions (Larus & Hargis, 2017, p. 14). This was made evident when in that same year, China lost its first WTO case in a preliminary ruling which declared that China’s tax policies that restricted imports of foreign automobile parts were violating WTO commitments, a case that was primarily denounced by the US (“The U.S. wins auto parts case against China: official”, 2008)


In 2010, the Obama administration launched a “Section 301 investigation” on China’s subsidy policies and investment in green technologies believed to have violated WTO policies, following a petition from the United Steelworkers. These investigations were initialised based on the US Trade Act of 1974, which states that the President of the US is allowed to take appropriate actions against international trade agreements that are believed to be unjust to the US (Chong & Li, 2019, p. 5). The US consulted with the WTO’s dispute settlement mechanism, and China did revise the subsidy policies that were being questioned, dodging a full-fledged trade war (Chong & Li, 2019, p. 5). This example from the Obama administration of the US-China trade relationship continues to be relevant to illustrate the already-tense trade relations between both parties, even before Donald Trump’s Presidency accession.


The start of the trade war and President Trump’s agency


President Trump did have a huge role in worsening and accelerating the relationship downfall between the US and China. In 2019, the New York Times published an article which highlighted the fact that Donald Trump’s appreciation for tariffs began as early as the 1980s. In a 1988 interview with Oprah Winfrey, he stated that Japanese cars and videocassette exports were no competition to American ones, as they “knock the hell out of our companies” (Tankersley & Landler, 2019).


Already in his Presidency, Donald Trump started implementing 2017 2018 the protectionist measures he had advertised during the 2016 presidential election campaign (Boylan, McBeath & Wang, 2020, p. 2). In his attempt to bring the previously outsourced jobs back to the US, his administration put a 25 per cent tariff which targeted certain Chinese imports, totalling $34 billion (Evans, 2019, p. 2). This move was countered by China also imposing tariffs on a cluster of US products (Boylan et al., 2020; Evans, 2019; Zhang, 2018). The trade war had commenced in a tit-for-tat battle that grew stronger each month, prompting a reduction in bilateral trade that did not guarantee an increase of jobs in the US, as Chinese imports were simply replaced by other countries’ (Lester & Zhu, 2020, p. 21). After failed negotiations in May 2019, talks between both powers focused on a narrow cluster of issues, and in October 2019, a Phase One deal was finally reached, followed by a final version in December of that same year (Lester & Zhu, 2020, p. 21). The agreement detailed a pledge from China to resume the purchase of US products above 2017 levels, protect foreign intellectual property (IP) and stop forcing foreign technology transfer, amongst other clauses, while the Trump administration committed to cutting the existing tariffs by half, and suspending the planned tariffs on almost $200 billion worth of imports (Bisio et al., 2020, p. 1-2).


During these tumultuous years, the Trump administration did not only not consult with the WTO on how to solve the conflict, but it also adopted retaliatory measures without its authorisation and unilaterally imposed tariffs while bypassing its dispute settlement mechanism, placing the WTO in a marginalised position (Tu et al., 2020, p. 218). As Law Professor Rachel Brewster summarises, President Trump’s used a three-way strategy to effectively undermine the WTO, which was based on blocking new judicial nominations of the WTO’s Appellate Body, taking a unilateral approach to trade disputes, and using national security to justify imposing tariffs (2018, p. 3-5).


After the Deal: Biden and the Pandemic


After the signing of the US-China Economic and Trade Agreement (Phase One) in 2020, the 18-month trade war finally ceased, yet it soon became apparent that China was not meeting the legally binding purchase commitments it had promised in the agreement (Bown, 2021, p. 31). However, while looking at a broader context, the first few months of 2020 were particularly hard for the Asian giant, as the pandemic had devastating impacts on all levels, including its economy: pre-pandemic forecasts predicted that China’s economy would grow by approximately 6 per cent in 2020, yet by the end of 2020, it had only grown by 2.3 per cent (Bown, 2021, p. 33).


In the thick of this unfavourable scenario, Joe Biden became the 46th US President. The Biden administration was expected to also take a hard stance on China’s current economic and social policies, as punitive tariffs on Chinese imports were not lifted and new restrictions were even considered (Steinberg & Tan, 2022, p. 2). The most pressing issue, however, is the technology war between both powers, which is still going strong as Beijing’s launch of the state-led policy “Made in China 2025” (MIC 2025) aims to make China a world leader in the technologies necessary for the alleged fourth industrial revolution. Amidst this technological race, the Biden administration’s response to MIC 2025 has been deemed as a continuation of its predecessor: using every tool, sanction, and policy created to restrict China’s technology advances, crippling the Asian power’s capacity to compete (Schoenbaum, 2023, p. 121-123) .


Although very similar, the most notable difference between both administrations is that, as former WTO Appellate Body judge James Bacchus (2022) describes, the Biden administration’s trade policy is based on “polite protectionism”. Nonetheless, Biden’s trade policy has not convinced many Americans: as WTO’s 2007 “World Trade Report” author Simon Schropp (2022) puts it, “the absence of US leadership in trade (no trade policy), coupled with neo-protectionism (no-trade policy), ultimately constitutes a continuation of the Trump-era trade tactics” (p. 400).


Conclusions


The purpose of this article was to revisit the US-China trade war, which had been a highly mediatised conflict up until the pandemic arguably took up almost all news coverage in early 2020.


After reviewing the evolution in the trade relations between both powers, a tense escalation can be observed following the actions of the three different administrations. Thought to have peaked with the Trump administration, the trade war’s uncertainty has continued throughout Joe Biden’s Presidency, as both the US and China are currently making efforts to “decouple” their economies, especially the US in their sensitive technology sector (Palmer, 2023). This unpredictability continues to have an impact on the WTO.

The Trump administration 2017 attack on the multilateral trading system, which was based on continuously blocking the appointment of new judges of the WTO Appellate Body, left international trade without an appeal system (Petersmann, 2018, p. 1-3). While it is of dire importance to restore the Appellate Body for several reasons (Hoda, 2021, p. 21), there is a consensus in the fact that if no reforms or solutions are proposed shortly, the US, or any other future WTO Members that want to, will end up being successful in impeding the functioning of one of the most important multilateral institutions ever created (Gao, 2021, p. 18), and international trade will be left without fair judging and objective arbitration, which, as seen in this article, only makes conflicts worsen, and trade wars endless.


This article represents the views of contributors to STEAR's online digital publication and not those of STEAR, which takes no institutional positions.


 

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