Leadership disputes have for several decades punctuated economic and trade relations between the US and China. Engaged in a trade war that had entered a new phase under the previous Trump administration, the two countries are studying different avenues to ease tensions.
A Historic Trade Agreement
After imposing mutual customs duties on hundreds of billions of dollars in annual trade, the two countries agreed to a trade truce in January 2020, ending the trade war started by former President Donald Trump. They had reached an agreement on "phase 1." China has pledged to buy an additional $200 billion in US goods in the two years following the agreement's entry into force. These purchases would aim to reduce the American trade deficit, which is a major claim of the White House. The agreement also included provisions concerning intellectual property protection and technology transfer conditions, which are important requirements in the US. However, this agreement was described as historic because the economic context in which it took place was not favorable.
By the end of the first quarter of 2021, Beijing had made only 61 to 75% of the purchases planned at this stage, according to a study issued by the Peterson Institute for International Economics (PIIE), carried out using international trade data published by the two countries. This agreement also failed to resolve the issue of tariff barriers because it did not provide for the abolition of customs duties.
The Peterson Institute study revealed that the level of customs duties applied by the US on Chinese products remains at 19.3%, six times higher than at the start of the trade war, in 2018. These duties cover 335 billion dollars of products, or 66.4% of Chinese imports to the US. In return, China is continuing to apply taxes of 20.7% on average, on 90 billion dollars of American products, or 58.3% of American imports into China.
For the time being, there are no signs that tensions are easing because, while the tone has shifted with the new American administration, the substance has remained largely unchanged. Only time will tell for sure.
Learn More with EXIMA News
EXIMA News is here to provide you with all the latest updates on global news. Take a look at our News Page to learn more about current events!