The trade war between the United States and China is about to get uglier. After a long, hot summer spent weighing risks and firing warning shots, the hawks in President Trump’s administration have gained the upper hand — and they’re set to unleash a fall offensive.
Talks in Washington this week yielded little visible progress toward a cease-fire between the world’s two largest economies. Looming instead are new tariffs that Trump has threatened to impose on some $200 billion in annual imports from China, and Beijing’s already-promised retaliation.
“We’re facing an escalating trade war over the next few months,” says David Dollar of the Brookings Institution, who served as the U.S. Treasury’s top man in China in the Obama administration.
Even before the latest talks broke up, the signals weren’t hard to read. Earlier this year, the president publicly overruled Steven T. Mnuchin and ripped up a deal the Treasury secretary had struck with Liu He, his Chinese counterpart.
In the last week, while the two sides were talking, the United States went ahead with tariffs on a further $16 billion in Chinese imports. Retaliation by Beijing will bring the amount of trade affected by the dispute to $100 billion, with more to come.
Trump also celebrated new restrictions on inbound investment from China this week.
“Not enough focus has been put on China. And that’s been for a long time,” the president told legislators gathered at the White House on Thursday to mark the passage of a law giving yet more powers to the already powerful Committee on Foreign Investment in the United States, which can block acquisitions on national security grounds.
And on Friday, Trump’s officials were huddled in Washington with counterparts from Europe and Japan, discussing how to push China into changing course.
It all adds up to what many analysts see as a victory for the president’s China hawks, in the debate over how to tackle the first major strategic rival that the United States has faced since the end of the Cold War.
Scott Kennedy, a China expert at the Center for Strategic and International Studies in Washington, says the hawks’ victory is reflected in the way U.S. demands have evolved in recent weeks.
When Mnuchin and Commerce Secretary Wilbur Ross led missions to Beijing earlier this year, one key priority was securing increased purchases of American soybeans, liquid natural gas and other commodities, to reduce a bilateral trade deficit that’s been a persistent obsession for Trump.
A few months on, the administration’s goals are more maximal. It’s demanding the kind of long-term structural changes to Chinese policy — such as ending industrial subsidies and intellectual-property theft — that hawks including Robert Lighthizer, the U.S. trade representative, and White House trade advisor Peter Navarro have been pushing for.
That doesn’t mean that internal trade battles at the White House are over. The hawks are eyeing an even more ambitious agenda, says Kennedy: A long-term disentanglement of the two economies, with the goal of bringing supply chains back from Asia to the United States.
Chad Bown, a trade expert at the Peterson Institute for International Economics, says the administration’s end-game remains unclear. At home, there’s growing unrest in the business community and among consumers. In hearings this week, a procession of small and medium-sized companies complained about the forthcoming tranche of tariffs, which will hit some 6,000 products, including seafood and bicycles.
Bown has seen firsthand how the dispute has arrived in American homes. Tariffs are about to make his mother’s quilting supplies more expensive — and “there’s a big community of quilters out there like my mom.”
“More and more Americans are going to feel this,” he says. “We haven’t gone through a moment like this before. Politically, I’m not sure how it ends.”