US-China Trade War: Who Compromised And How?

Hugo van Dijk

5 min read

Post on May 16, 2025

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US Compromises and Concessions

The United States, despite initiating the trade war with tariffs on steel and aluminum, also made significant concessions throughout the negotiations.

Tariff Reductions and Phase One Deal: The highly anticipated "Phase One" trade deal, signed in January 2020, marked a crucial turning point. This agreement involved substantial tariff reductions on Chinese goods.

• Specific Tariffs: Tariffs on hundreds of billions of dollars worth of Chinese goods were reduced or suspended. This included various sectors, from agricultural products like soybeans to manufactured goods like electronics.
• Timeline: The tariff reductions were implemented gradually, with some taking effect immediately, while others were phased in over time.
• Conditions: These reductions were contingent on China's commitment to significantly increase its purchases of US goods and services, a key component aimed at reducing the US trade deficit.

Intellectual Property Rights (IPR) Protections: A major US grievance leading to the trade war was the alleged theft of intellectual property by Chinese companies. While the US didn't fully achieve all its goals in this area, some progress was made.

• Legal Changes: China enacted several changes to its laws and enforcement mechanisms related to IPR protection, including stronger penalties for infringement.
• Enforcement Challenges: However, criticisms persist regarding the actual enforcement of these changes, with concerns that intellectual property theft remains a significant issue.

Market Access for US Businesses: The trade negotiations aimed to secure greater market access for American businesses operating in China.

• Financial Services: Some improvements were observed in market access for US financial services companies.
• Automotive: Similar progress, albeit limited, was seen in the automotive sector.
• Quantifying Impact: Precise quantification of the overall impact on market access remains challenging due to the complexity of the Chinese market and data limitations.

Chinese Compromises and Concessions

China, while initially resistant, ultimately made substantial concessions to de-escalate the trade war.

Increased Purchases of US Goods: A cornerstone of the Phase One deal was China's commitment to significantly increase its purchases of US goods and agricultural products.

• Purchase Targets: Specific targets were set for purchases across various sectors.
• Shortfalls: However, China did not fully meet its purchase targets, partly due to unforeseen economic headwinds and internal policy adjustments. The reasons for these shortfalls remain a subject of debate.

Regulatory and Structural Reforms: China agreed to undertake certain economic and regulatory reforms.

• State-Owned Enterprises (SOEs): Reforms targeting SOEs aimed at creating a more level playing field for both domestic and foreign businesses.
• Subsidies: China committed to reducing certain subsidies that were deemed to distort international trade.
• Foreign Investment: Some improvements were made regarding regulations concerning foreign investment in China, though significant challenges remain.

Technological Transfer Restrictions: One of the most contentious issues was the alleged pressure on US companies to transfer technology to Chinese entities.

• New Regulations: China introduced new policies and regulations designed to prevent forced technology transfer.
• Effectiveness: The effectiveness of these measures remains a topic of ongoing debate, with varying assessments on their actual implementation and impact.

Assessing the Overall Impact and Outcomes

The US-China Trade War had profound and multifaceted effects.

Economic Effects on Both Countries: Both the US and China experienced economic consequences, though the extent and nature of these impacts differed.

• GDP Growth: The trade war negatively impacted GDP growth in both countries, though the impact was arguably more pronounced on China due to its greater reliance on exports.
• Inflation: The trade war contributed to inflationary pressures in both countries, as tariffs increased the cost of imported goods.
• Employment: The trade war resulted in job losses in some sectors in both countries. The impact on employment was not uniform and varied across different industries and regions.

Geopolitical Implications: The trade war extended beyond purely economic implications.

• Global Trading System: The trade war raised concerns about the stability of the multilateral trading system and the potential for a breakdown of international cooperation.
• US-China Relations: The trade war severely strained US-China relations, exacerbating existing geopolitical tensions.
• Role of Other Countries: Other countries were also affected by the trade war, facing disruptions to their supply chains and trade relationships.

Long-Term Effects and Future of Trade Relations: The lasting impacts of the US-China trade war are still unfolding.

• Restructuring Supply Chains: Companies are actively reassessing their supply chains, potentially leading to a less interconnected global economy.
• Technological decoupling: Increased tensions have led to calls for greater technological independence for both nations, potentially hindering future collaboration.
• Future Negotiations: The path forward for US-China trade relations remains uncertain, with possibilities ranging from continued tension to renewed cooperation.

Conclusion

The US-China Trade War witnessed significant compromises from both sides, but the overall impact was complex and far-reaching. While the Phase One deal brought some temporary relief through tariff reductions and purchase commitments, it fell short of resolving many fundamental issues. The economic effects were felt globally, with implications for GDP growth, inflation, and employment. Geopolitically, the trade war deepened existing tensions and raised serious concerns about the future of global trade. Understanding the complexities of the US-China Trade War requires ongoing analysis. Continue your research to stay informed about the evolving dynamics of this crucial relationship.