Trade War: 2018 - present

During his Presidential campaign beginning in June 2015, Donald Trump consistently blamed China for taking advantage of the United States. He has targeted the U.S.'s trade deficit with China as what is damaging America's economy and he seeks to minimize the deficit in order to even relations and strengthen the American economy.

But, many economists disagree with this strategy and they assert that the trade deficit does not harm the economy (CFR 2019).

When did the trade deficit start?

In 2001, China became a member of the World Trade Organization (WTO) and received favorable terms and policies regarding international trade. This time is sometimes referred to as "China Shock" because of the unexpected rapid growth of China's export manufacturing sector. This change occurred because Beijing completely overhauled its policies and implemented economic reforms to subsidize production, accelerate industrialization, and boost exports.

Thus, beginning in the early 2000s, China was nicknamed "the world's factory" and it has embraced this mode of growth. There has been an influx of Chinese goods in the U.S. because so many goods were made in Chinese factories and exported to the U.S. for very competitive, low prices.

How has the trade war affected the U.S. and China thus far?

"The nine-month trade war between the world's largest economies has disrupted supply chains, whipsawed markets and weighed on the world economy. The International Monetary Fund cut its outlook for global growth to the lowest since the financial crisis, while including a breakdown in U.S.-China talks among possible risks" (Bloomberg 2019).

With the growing importance of international connections, the Chinese and American economies will become even more intertwined and reliant on one another and a war on trade will greatly inhibit success for both countries.

China is an export-based economy and has been since the mid 1990s when the People's Republic of China (PRC) implemented massive economic modernization reforms. Contrastingly, the United States has become a service-based economy, which needs to import goods. These varying economies and the trade deficit do not mean that one is better than the other, but that they supplement and rely on the other and greatly form global political norms and relationships.