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The 2018 US-China Trade Conflict after 40 Years of Special Protection

Author

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  • Chad P. Bown

    (Peterson Institute for International Economics)

Abstract

In 2018, the United States suddenly increased tariffs on nearly 50 percent of its imports from China. China immediately retaliated with tariffs on more than 70 percent of imports from the United States. This paper assesses what happened in 2018 and attempts to explain why. It first constructs a new measure of special tariff protection to put the sheer scope and coverage of the 2018 actions into historical context. It then uses the lens provided by the 2018 special tariffs to explain the key sources of economic and policy friction between the two countries. This includes whether China’s state-owned enterprises and industrial subsidies, as well as China’s development strategy and system of forcibly acquiring foreign technology, were imposing increasingly large costs on trading partners. Finally, it also examines whether the US strategy to provoke a crisis—which may result in a severely weakened World Trade Organization—was deliberate and out of frustration with the institution itself.

Suggested Citation

  • Chad P. Bown, 2019. "The 2018 US-China Trade Conflict after 40 Years of Special Protection," Working Paper Series WP19-7, Peterson Institute for International Economics.
    • Handle: RePEc:iie:wpaper:wp19-7
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    Cited by:

    1. Xu, Yongan & Wang, Jianqiong & Chen, Zhonglu & Liang, Chao, 2021. "Economic policy uncertainty and stock market returns: New evidence," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    2. Bown, Chad P., 2021. "The US–China trade war and Phase One agreement," Journal of Policy Modeling, Elsevier, vol. 43(4), pages 805-843.
    3. Rudi Purwono & Unggul Heriqbaldi & Miguel Angel Esquivias & M. Khoerul Mubin, 2022. "The American–China Trade War and Spillover Effects on Value-Added Exports from Indonesia," Sustainability, MDPI, vol. 14(5), pages 1-22, March.
    4. Gregory Whitten & Xiaoyi Dai & Simon Fan & Yu Pang, 2020. "Do political relations affect international trade? Evidence from China’s twelve trading partners," Journal of Shipping and Trade, Springer, vol. 5(1), pages 1-24, December.
    5. Kyle Handley & Fariha Kamal & Ryan Monarch, 2020. "Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism," Working Papers 676, Research Seminar in International Economics, University of Michigan.
    6. James A. Giesecke & Nhi H. Tran & Robert Waschik, 2021. "Should Australia be concerned by Beijing’s trade threats: modelling the economic costs of a restriction on imports of Australian coal," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(1), pages 1-22, January.
    7. Munisamy Gopinath, 2021. "Does Trade Policy Uncertainty Affect Agriculture?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(2), pages 604-618, June.
    8. Adam Jakubik & Victor Stolzenburg, 2020. "Footloose Global Value Chains: How Trade Costs Make a Difference," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(2), pages 245-261, September.
    9. J.A. Giesecke & R. Waschik & N.H. Tran, 2019. "Modelling the Consequences of the U.S.-China Trade War and Related Trade Frictions for the U.S., Chinese, Australian and Global Economies," Centre of Policy Studies/IMPACT Centre Working Papers g-294, Victoria University, Centre of Policy Studies/IMPACT Centre.
    10. Magdalene Silberberger & Anja Slany & Christian Soegaard & Frederik Stender, 2022. "The Aftermath of Anti-Dumping: Are Temporary Trade Barriers Really Temporary?," Open Economies Review, Springer, vol. 33(4), pages 677-704, September.
    11. Marwa Riaz & Ahmad Raza & Zaheer Ahmed & Dr. Imran Wakil, 2025. "US-China Trade War: Economic Implications on South Asia," International Journal of Politics & Social Sciences Review (IJPSSR), International Journal of Politics & Social Sciences Review (IJPSSR), vol. 4(I), pages 55-68.
    12. Zhang, Xufang & Haviarova, Eva & Zhou, Mo, 2020. "A welfare analysis of China's tariffs on U.S. hardwood products," Forest Policy and Economics, Elsevier, vol. 113(C).
    13. repec:ags:aaea22:335549 is not listed on IDEAS
    14. Huthaifa Sameeh Alqaralleh, 2023. "The extreme spillover from climate policy uncertainty to the Chinese sector stock market: wavelet time-varying approach," Letters in Spatial and Resource Sciences, Springer, vol. 16(1), pages 1-17, December.
    15. Bouët, Antoine & Traoré, Fousseini & Laborde Debucquet, David, 2019. "A global trading system in turmoil: What is at stake for Africa?," IFPRI book chapters, in: Africa agriculture trade monitor 2019, chapter 5, pages aatm109-1, International Food Policy Research Institute (IFPRI).

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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