With the upcoming 2024 US election, the tension between China and the US on trade has once again come to the forefront. As the possibility of Donald Trump returning to the White House looms, there are fears of escalated tariffs and economic repercussions. The recent moves by both countries have set the stage for a potential trade war that could have far-reaching implications for key industries.
- Updated Sanctions: The US recently updated its export sanctions on China, focusing on high-bandwidth memory chips and semiconductor manufacturing equipment. Additionally, Washington added 140 Chinese companies to the commerce department’s “entity list,” restricting technology supply to these entities. This move signals a shift towards a more aggressive stance on trade relations with China.
- Retaliatory Actions: In response, China has imposed bans and limitations on the purchase of critical minerals and tightened controls on graphite. These retaliatory actions strategically target crucial US industries such as semiconductors, satellites, and other technologies. This tit-for-tat approach highlights the high stakes involved in the US-China trade relationship.
- Trade Dependency: Contrary to the common belief of a one-way dependency, the US is as reliant on China as China is on the US. While the US relies on Chinese goods for income-constrained consumers and export markets, China holds significant investments in US Treasury securities. This interdependency underscores the delicate balance of power in the global economy.
As the possibility of a second Trump administration looms, it is essential to consider the potential consequences of escalating trade tensions between the US and China. The risk of a full-blown trade war, triggered by retaliatory measures on both sides, poses a threat to global financial stability.
In the post-election scenario, policy discussions around tariffs and unilateral actions should take into account the intricate web of economic interdependence between the two nations. Trump’s “America First” approach must factor in the vulnerabilities of a saving-short US economy dependent on Chinese goods and financial investments. China holds significant leverage in the form of “Trump cards” that could disrupt the fragile balance of power. As we navigate the uncertain waters of US-China trade relations, it is clear that unilateral actions can have cascading effects that could lead to broader economic turmoil.
