DISCUSSION OF FINDING

Overall, Average tariff rate of China is higher than the USA. The analysis of tariff data underscores the strategic use of trade policies by the USA and China to achieve broader economic and geopolitical goals. While the USA adopted aggressive tariff measures during the trade war, China leveraged reductions to maintain economic stability and strengthen global partnerships. Specific tariffs, which impose a fixed fee per unit of imported goods, are commonly used in both countries but focus on different sectors. The U.S. applies these tariffs primarily to agricultural products and raw materials, such as a fixed rate per kilogram of sugar or dairy, ensuring predictability for domestic producers. In contrast, China utilizes specific tariffs for strategic imports, such as grains and minerals, safeguarding essential sectors from price fluctuations. Ad-valorem tariffs are the most dominant type in both countries. The United States employs these tariffs extensively for high-value and industrial goods, including automobiles, where a 2.5% tariff is standard. Similarly, China relies heavily on ad-valorem tariffs, targeting value-added goods such as electronics and vehicles, and imposing retaliatory tariffs on U.S. agricultural exports like soybeans, which saw rates rise to 25%. These tariffs adjust flexibly to price changes, making them effective tools in both countries' trade strategies.

Mixed tariffs, combining specific and ad valorem components, are less frequently employed but serve niche purposes. In the U.S., they are used for goods like footwear, balancing both price and quantity considerations. In China, mixed tariffs are occasionally applied to luxury items or goods with significant price variability, such as certain electronics, providing a dual-layer of protection. Overall, the U.S. tends to favor straightforward and transparent tariff structures in alignment with WTO rules, whereas China’s approach often includes more strategic and nuanced applications to manage domestic economic priorities.

Both nations leverage NTBs to pursue economic and strategic goals, albeit with different approaches. China’s NTBs are focused on protecting state-owned enterprises and key sectors, while the US’s policies emphasize safeguarding intellectual property, national security, and domestic industries. The use of NTBs by these two economic giants highlights their significance as tools for shaping trade dynamics in the global economy.

Both countries maintain comprehensive export control frameworks aimed at regulating sensitive technologies and safeguarding national security. China’s evolving regulations mirror global practices, incorporating re-export controls and sanction-aligned measures, while the U.S. focuses on transparency, end-use monitoring, and international collaboration. These regulatory regimes reflect their respective priorities and underline the strategic importance of export controls in global trade.

Both the United States and China leverage trade agreements to boost their economic and strategic objectives, but their approaches differ. The U.S. prioritizes comprehensive agreements with robust enforcement mechanisms, focusing on fair competition, innovation, and intellectual property rights. In contrast, China emphasizes building extensive networks with developing economies and regional blocs to secure market access and strengthen supply chains. U.S. trade agreements often align with broader foreign policy goals, promoting democratic values and transparency. Conversely, China’s agreements frequently prioritize economic dominance and regional integration, particularly in Asia-Pacific. Both nations benefit from enhanced trade flows, investment opportunities, and economic resilience. However, differing regulatory standards and enforcement mechanisms can lead to friction in global trade dynamics. Trade agreements remain a cornerstone of economic policy for both nations, shaping the global economic landscape and their roles within it. The evolving nature of these agreements reflects shifting priorities in an increasingly interconnected world.

The U.S. faced a widening deficit as its economy relied heavily on imports. China capitalized on global demand to sustain a positive trade balance. The U.S. deficit highlights a dependency on foreign manufacturing, particularly from China. China’s surplus underscores its dominance in global exports, enabling it to exert economic influence. U.S. efforts to reduce the deficit through tariffs and trade agreements had limited long-term success. China leveraged free trade agreements and robust manufacturing to maintain its surplus.

The U.S. benefits from its proximity to Canada and Mexico, fostering regional trade efficiency under USMCA. China leverages regional partnerships through agreements like RCEP to enhance trade volume and supply chain integration. The U.S. excels in high-value exports like machinery, aircraft, and agricultural goods. China dominates in manufacturing and exports of consumer goods, electronics, and textiles. Both nations are economically interdependent, with trade flows between them critical despite tensions. The U.S. relies heavily on China for imports, while China depends on the U.S. as a significant export market.

GDP

In the USA, trade policies, particularly the imposition of tariffs during the U.S.-China trade war, had mixed effects on GDP. While the primary goal of these tariffs was to boost domestic production, they also led to increased costs for businesses and consumers. According to the U.S. Bureau of Economic Analysis (BEA), real GDP growth slowed from 2.9% in 2018 to 2.3% in 2019, with trade tensions being a contributing factor. In contrast, China's GDP growth remained robust despite the trade war, although it decelerated from 6.7% in 2018 to 6.1% in 2019. The resilience of China’s economy was largely due to liberalized trade policies and strong domestic demand, which mitigated the impact of U.S. tariffs.

Employement

The trade war had varying impacts on employment in the USA. Industries reliant on Chinese imports, such as electronics, experienced job losses, while tariff-protected sectors like steel saw temporary job gains. Despite these fluctuations, the overall unemployment rate remained stable at 3.9% in 2018, indicating a limited net impact on employment levels. In China, export-oriented sectors faced employment pressures due to reduced U.S. demand. However, government efforts to support domestic industries and explore alternative markets helped stabilize the urban unemployment rate at around 5.2% in 2019.

Inflation

In the USA, tariffs on Chinese goods contributed to inflationary pressures, leading to higher consumer prices. The U.S. Consumer Price Index (CPI) rose by 2.3% in 2019, with significant price increases in electronics and consumer goods. Similarly, China experienced moderate inflationary effects, with its CPI rising by 2.9% in 2019. Food prices, particularly pork, were a major driver of inflation in China due to supply constraints.

Income Distribution

The income distribution effects of the trade war were more pronounced in the USA, where lower-income households bore the brunt of rising prices for essential goods due to tariffs. A Federal Reserve study estimated that the tariffs imposed in 2019 cost the average U.S. household $1,277 annually. In China, the impact on income distribution was less significant but still noticeable among rural households dependent on agricultural exports. Government subsidies and social policies played a key role in cushioning the effects for affected communities.

The trade policy of China is more flexible and in tune with the long-term economic objectives of trade diversification, liberalization, and integration with the rest of the world. China has been able to maintain economic growth with minimal inflationary pressures through tariff reduction and by reaping benefits from regional trade agreements like RCEP.

Model: In this regard, China's trade policy strikes a balance between economic growth, generation of employment, and global competitiveness. Through regional cooperation, trade liberalization, and strategic non-tariff barriers, China has put in place a strong trade regime which is supportive of sustained economic growth.