The trade war between the US and China is about to get uglier. After a long, hot summer spent weighing risks and firing warning shots, the hawks in President Donald Trump’s administration have gained the upper hand - and they’re set to unleash a fall offensive.
Talks in Washington last 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 $200bn 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 US Treasury’s top man in China under 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 Mnuchin and ripped up a deal the Treasury secretary had struck with Liu He, his Chinese counterpart.
In the past week, while the two sides were talking, the US slapped tariffs on a further $16bn in Chinese imports. Retaliation by Beijing will bring the amount of trade affected by the dispute to $100bn, with more to come.
Trump also celebrated new restrictions on investment from China last 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 US, 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 win for the president’s China hawks, in the debate over how to tackle the first major strategic rival the US 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 US 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, LNG 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 US trade representative, and White House trade adviser Peter Navarro have been pushing for. “A spectrum shift,” Kennedy calls it.
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.
US President Trump delivers remarks at the Ohio Republican Party State Dinner in Columbus, Ohio, on Friday. The hawks in the Trump administration have gained the upper hand - and they’re set to unleash a fall offensive on China.
