US-China Tariffs, 2018-2022

US-China Tariffs, 2018-2022

Source: Peterson Institute for International Economics.

In 2000, the United States granted China the most-favored nation status, implying that tariffs imposed by the United States on Chinese goods would be similar to those that it imposes on the nation it has the most favorable tariffs (excluding those accorded to nations part of free trade agreements such as NAFTA/USMCA). This resulted in average tariffs on Chinese goods in the range of 3%, giving a strong impetus for trade and the outsourcing of many manufacturing activities in China. In time, trade between the United States and China became an increasingly contentious issue as it was perceived to be giving a massive subsidy to Chinese firms dumping low-cost goods on the American market. The United States accused China of several unfair trade practices, including forcing the formation of joint ventures with Chinese firms, cyber hacking, and technological espionage. Further

In 2018, the United States undertook a massive revision of its trade policy with China, which led to a ‘trade war’. The initial increases in tariffs were reciprocated by China in a series of phases that, by 2020, stabilized at around 19.3% for Chinese exports and 21.2% for American exports. During the same period, as the United States increased slightly the average tariffs imposed on its trade partners, China reduced theirs, changing the competitiveness of industrial sectors. For instance, in 2018, China increased tariffs on American cars to 25%, and it reduced tariffs on third countries’ cars, such as Japan, Germany, and South Korea, to 15%. This underlines a new phase reminiscent of the situation prior to the economic reforms of the 1980s when tariffs were high.