China’s Foreign Minister, Wang Yi, stated on Tuesday that yielding ground will only embolden aggressive behavior, while suggesting that discourse offers a path to resolving disagreements.
US Treasury Secretary Scott Bessent commented late Monday that the US government remains in communication with China, but emphasized that it is Beijing’s responsibility to initiate steps to ease trade tensions with the US, citing the existing trade imbalance between the two countries.
Key quotes
Making concessions and backing down will only encourage aggressive behavior.
Dialogue provides a means to resolve differences.
Market reaction
As of this writing, the AUD/USD currency pair is trading down by 0.02% on the day, currently priced at 0.6430.
US-China Trade War FAQs
In general terms, a trade war signifies an economic dispute between nations driven by extreme protectionist measures. This involves the implementation of trade restrictions, such as tariffs, which then provoke retaliatory measures, leading to increased import costs and, consequently, a higher cost of living.
The economic friction between the United States and China commenced in early 2018, when then-President Donald Trump imposed trade barriers on China, alleging unfair trade practices and the misappropriation of intellectual property by the Asian nation. China responded with retaliatory measures, levying tariffs on various US products, including automobiles and soybeans. Tensions rose until the US and China formalized the Phase One trade agreement in January 2020. This agreement stipulated structural reforms and other adjustments to China’s economic and trade framework, aiming to restore stability and confidence between the two countries. However, the Coronavirus pandemic shifted focus away from the dispute. It is important to note that President Joe Biden, who succeeded Trump, maintained the tariffs and even introduced additional levies.
The return of Donald Trump to the White House as the 47th US President has triggered renewed tensions between the two nations. During his 2024 election campaign, Trump pledged to impose tariffs of 60% on Chinese goods upon his return to office, which occurred on January 20, 2025. With Trump’s return, the US-China trade war is expected to resume where it left off, with reciprocal policies impacting the global economic environment through disruptions in global supply chains, leading to decreased spending, particularly in investment, and directly contributing to Consumer Price Index inflation.
