Sino-American Clash of Hegemony: An Analysis of US-China Trade War

Abstract

In economic history, 2018 will be remembered as the year that the US started a trade war with China. The longtime leading hegemony is now embarking with the rising hegemony in one of the largest trade wars in economic history to date. US-China economic ties have expanded substantially since China began reforming its economy and liberalizing its trade regime in the late 1970s. According to the INVESTOPEDIA DICTIONARY, a trade war is a side effect of protectionism that occurs when one country (Country A) raises tariffs on another country’s (Country B) imports in retaliation for Country B raising tariffs on Country A’s imports. As it escalates, a trade war reduces international trade. China and the United States are engaged in a trade war as each country continues to dispute tariffs placed on goods traded between them. US President Donald Trump had promised in his campaign to fix China’s longtime abuse of the broken international system and unfair practices (https://democracyjournal.org/magazine/52/trade-parade-of-broken-promises/). The economic disputes occurred before China’s entry to the World Trade Organization but former Presidents George H. W. Bush, Bill Clinton, George W. Bush, and Barack Obama all failed to solve the problems. In April 2018, the United States filed a request for consultation to the World Trade Organization in regard to concerns that China was violating intellectual property rights. In adding various tariffs, the US administration is relying partly on Section 301 of the Trade Act of 1974 to prevent what it calls unfair trade practices and theft of intellectual property (https://cen.acs.org/policy/intellectual-property/US-files-complaint-over-Chinas/96/i14). This gives the president the authority to unilaterally impose fines or other penalties on a trading partner if it is deemed to be unfairly harming US business interests, especially if it violated international trade agreements. In August 2017, the US opened a formal investigation into attacks on the intellectual property of the US and its allies, which cost the US alone an estimated $225 - 600 billion a year in losses. The result is that the US believes Chinese laws undermine intellectual property rights by forcing foreign companies to engage in joint ventures with Chinese companies, which then gives the Chinese companies access and permission to use, improve, copy or steal their technologies. The US also raises concerns that China fails to recognize legitimate patents and copyrights, and discriminates against foreign imported technology, and that China has instituted numerous non-tariff barriers which have insulated sectors of the Chinese economy from international competition. Thus, the trade war is seen as largely focused on intellectual property in China, especially regarding technology. The trade war began in earnest in July with the US levying its first round of punitive tariffs, triggered by an investigation under Section 301 of the Trade Act into Chinese trade and intellectual property practices (https://www.scmp.com/comment/insight-opinion/article/2142491/why-us-sanctions-zte-might-turn-out-be-best-thing-chinas).