The US-China trade war has seemingly no end in sight, not unlike the sound of a fly trapped in your room while you’re trying to sleep. But, unlike a fly that you can help escape through an open window, there doesn’t appear to be any quick resolution between China and America.
Donald Trump began his tenure as president by investigating unfair trade practices in China and then slapped a 25 percent tariff on the country for all goods coming into the United States.
Four years later, after stepping down from his position in Office, those tariffs still remain. Even after the Phase One trade deal was signed in January 2020, U.S. tariffs on Chinese products held fast. With the COVID-19 pandemic turning the world on its head, the trade war faded into the background – used only to highlight China’s inability to meet the conditions of the deal to purchase an additional $200 billion in American products over the course of 2017 to 2021. And while half of you might blame Trump for this economic aberration, the trade war continues to ravage the U.S. economy even under Joe’s administration.
Thus far. the Biden administration has made no changes to tariff structures and is said to be examining the Phase One trade deal. Wang Yi, the Chinese foreign minister, recently asked President Biden to reinstate talks with China in an effort to remove current tariffs and sanctions. Wang pointed out that the United States has greatly diminished bilateral talks on all levels.
While discussions surrounding the trade war have yet to come to fruition, at the end of February, Biden signed an executive order to analyze global supply chains in four industries that were strongly affected by the pandemic. Those industries included:
- Computer chips
- Large-capacity electric vehicle batteries
- Critical minerals in electronics.
The semiconductor industry faced serious bottlenecks during the onset of the global pandemic when Chinese factories were forced into lockdown. The industries mentioned above were also hit by the U.S.-China trade war, and the two external shocks led many C-suite executives to reassess their firms’ global supply chain resilience.
In the trenches of all this, Biden has made proclamations that his administration has something in the works that will provide relief for both countries. Biden’s new supply chain strategy will require 100-day reviews for producers and distributors in these critical industries, as well as a year-long review of supply chains in six broader industries.
The primary purpose of the reviews is to understand the extent to which the industries are at risk. Once the evaluation has been completed, the next order of business is to convince those industries at risk to move suppliers out of shady circumstances or locations. How the Biden administration intends to restructure the supply chain infrastructure remains ambiguous, whereas China has endorsed the idea of the semiconductor industry requiring global cooperation for healthy growth. It would also like to increase self-sufficiency in competitive technologies.
The results of the US-based supply chain review can be used to negotiate with China regarding existing supply chains. However, U.S. trade officials have not asserted whether this will be a jumping-off point to review the conditions of the trade war or used for some other end goal.
Until the trade war is resolved, financial losses from higher costs will continue to mount. High U.S. tariffs remain on $370 billion products imported from China. These cover a wide range of goods – from machinery parts to electronics to seafood.
This perpetual trade war has proven to be very costly and has already dragged on long enough. The issues that were supposed to be resolved to go beyond an exploration of supply chains. They cover the material in the Phase One agreement (including intellectual property rights, technology transfer, and expansion of trade purchases) as well as a general adversarial approach to U.S.-China trade that stipulates a surplus between the two countries as unfair to the United States. Time should be taken to carefully address these issues through a series of meetings between the U.S. and China … but not too much time.
The Biden administration has expressed a wish to discuss U.S.-China trade relations with its allies first. It is critical that they do this immediately so that relations between the United States and China can be repaired. Washington wishes to secure its supply chains to reduce reliance on Chinese goods and to alleviate the monopoly that China currently holds in the manufacturing of goods like semiconductors.
The necessity for immediate engagement with China is especially important as aspects of China’s technology regime have been under fire for “techno- authoritarianism” – a disconcerting concept that the international news has reported on countless times. That being, the Chinese governments imposing the use of technology to spy on its own citizens and inhabitants of other countries. China’s tech giants work directly with spy agencies and The Guardian suggested in December that a Chinese state-owned phone-operator spy system was used on American users.
Surveillance is a fact of life for Chinese citizens and has become all too common for those who live in countries that have adopted Chinese surveillance technology – countries like Ecuador and Kyrgyzstan. Even more troublesome, this ecosystem of Chinese-based technologies carries a set of values that bolsters the Chinese state—a form of 21st-century authoritarianism that tethers the line between social control and efficiency.
The United States has kneecapped Chinese technology giants in the name of national security and human rights, but the United States and its tech companies also have a spotty history with the moral grounds they claim to uphold. To prevent China’s techno-authoritarianism from gaining traction, the United States must reverse course and start leading by example: it must reform its own “big brother” practices to align with policies – protecting its own citizens and leading by example.
As the United States prepares a review and legislation that would ultimately strive to bring chip manufacturing back home and to invest more in technology, the focus toward U.S. talks with China should focus on cooperation and reducing the worst effects of the trade.