USA-China Trade Wars: Back to Protectionism in World Trade

USA-China Trade Wars: Back to Protectionism in World Trade

Özlem Toplu Yılmaz (TC İstanbul Yeniyüzyıl University, Turkey)
Copyright: © 2020 |Pages: 23
DOI: 10.4018/978-1-5225-9566-3.ch004


This chapter analyzes the trade war between the United States of America and China. The United States of America and China are the two biggest trade leaders in the world. The United States supported China for its integration to world trade. The United States accused China of pursuing unfair trade policies. The United States increased tariffs against Chinese imports and China undertook retaliation measures against the United States' tariff increases. The two countries entered a period of a trade war and they started to implement protectionist policies on each other. These protectionist policies between the United States and China are seen as trade wars and could affect the world trade liberalization adversely. As they are trade partners too, it is better for both countries to end this war and to reach an agreement, because trade liberalization efforts could fail.
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There are limited studies about the USA and China trade war, and they are published online. These studies and the approaches of the authors are summarized below.

Chunding Li,Chuantian He and Chuangwei Lin analyzed the effects of possible China–USA trade wars by using a multi-country global general equilibrium (GE) model in their article “Economic Impacts of the Possible China-USA Trade War”. According to their simulation results, China will be hurt by the trade tensions with the United States. The United States can benefit from its trade policies against China, but may lose if China applies retaliation measures. America has a stronger bargaining power than China. According to the author, trade wars between China and America may hit most of the countries, distort the world trade, and reduce the world GDP.

Tao Liu and Wing Thye Woo examined the USA-China trade war in their article “Understanding the U.S.-China Trade War.” According to the authors, the best solution of the trade tensions will be the policy changes in United States and China. About the industrial policy dispute, the authors concluded that the technology transfer of China is a crucial dispute, as China uses its market power and gains at the costs of its trade partners.

Myeong Hwan Kim examined the trade imbalance between the United States and China in his article “The U.S.-China Trade Deficit”. The author expected to find a relationship between the United States’ trade deficit and the imports from China. However, he concluded the United States’ imports from China don’t have any effect on the United States’ trade deficit.

Amy Skonieczny analyzed the United States’ trade liberalization campaigns with China and Russia to find out how the negative domestic perception of the two potential partner countries impacted pro-trade narratives and shaped ‘outside’ lobbying strategies in her article “Trading with the enemy: narrative, identity and U.S. trade politics”. This article demonstrated how the domestic actors rely on existing country images – even when negative – to emotionally empower trade policy arguments and ironically glean legislative success.

Edward I-hsin Chen examined the U.S.-trade relations in his article “U.S.-China Trade Relations and Economic Distrust.” He suggested that the areas of cooperation include clean energy, climate change, and China's huge holdings of U.S. treasury bonds; areas of competition include intellectual property rights, intellectual property theft, currency exchange rates, and investment access to one another's markets.

Saiful Alim Rosyadi and Tri Widodo analyzed the impact of the United States’ tariff increases against Chinese imports in their article “Impact of Donald Trump’s tariff increase against Chinese imports on global economy”. They implemented a Global Trade Analysis Project (GTAP) model. According to the simulations, the policy might lead to a fall in the GDP and terms-of-trade. Welfare can decline in the United States and China. Another result would be an increase in the trade balance for United States.

Key Terms in this Chapter

Trade Disputes: Conflicts in trade occur, when a country does not remove its trade policy which is inconsistent with the WTO rules and harms other country’s trade.

Trade Protectionism: Implementation of trade policies by a country that restrict or limit trade against the other countries.

Retaliation Measures: When a country’s trade policy is inconsistent with the WTO rules, the consultations. If after these consultations, the losing country does not change its policy, WTO grants the other country to apply equivalent trade barriers.

Most Favored Nation (MFN): MFN clause provides that if any country grants a privilege to a GATT member country, then this privilege will be granted also to all GATT members unconditionally.

Trade Liberalization: Reducing of trade barriers like quotas, customs tariffs, etc., to ease trade between countries.

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