The US-China Trade War: The New Normal

Summary

The ever-escalating trade war between the U.S. and China has become a "new normal" in the international trade scene. Since January 2018, the U.S. average import tariffs on Chinese goods have risen from 3 to 23 percent. Meanwhile, China's retaliatory import tariffs on U.S. goods rose from 7 to 24 percent.

Key points

• Key points:
• Although the U.S. has long been advocating for a rule-based multilateral trading system, ad-hoc policies aimed to influence trade balances are not unusual.
• For example, in the 1980s, the Reagan administration forced Japan to adopt a voluntary export restraint (VER) of automobiles amid worries of persistent trade deficits. The VER did not help to reduce the trade deficit and was obsolete in the 1990s
• However, probably due to its simplicity, the idea of shrinking trade deficits by singling out a top trade partner still attracts the Trump administration.

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