2018 US-China Trade Conflict

In 2018, the US increased tariffs on nearly 50 percent of its imports from China. China immediately retaliated with tariffs on more than 70 percent of imports from the US. By the end of 2018, China’s new special tariffs covered more than 70 percent of imports from the US and raised the average Chinese tariff on imports from the US from less than 10 percent to over 18 percent. Chad Brown, Senior Fellow at the Peterson Institute, published the working paper, 2018 US-China Trade Conflict after 40 Years of Special Protection, reviews the situation in detail.

This paper assesses what happened in 2018 and attempts to explain why. It first constructs a new measure of special tariff protection to put the sheer scope and coverage of the 2018 actions into historical context. It then uses the lens provided by the 2018 special tariffs to explain the key sources of economic and policy friction between the two countries. This includes whether China’s state-owned enterprises and industrial subsidies, as well as China’s development strategy and system of forcibly acquiring foreign technology, were imposing increasingly large costs on trading partners. Finally, it also examines whether the US strategy to provoke a crisis—which may result in a severely weakened World Trade Organization—was deliberate and out of frustration with the institution itself.

Click here to read the full paper.