Why Did the China–United States Trade War Happen?
Introduction
The trade war between China and the United States is one of the most significant economic conflicts of the 21st century. It has reshaped global supply chains, disrupted international markets, and altered the balance of power in global trade. While tariffs and sanctions became the most visible symbols of the conflict, the roots of the China–US trade war go far deeper than trade deficits alone.
This article explains why the China–US trade war happened, examining its economic, political, and strategic causes, and why the conflict continues to influence global commerce today.
 |
| China–United States Trade War |
Background of the China–US Trade Relationship
For decades, China and the United States maintained a deeply interconnected economic relationship. After China joined the World Trade Organization (WTO) in 2001, trade between the two countries expanded rapidly.
The US benefited from low-cost Chinese manufacturing.
China gained access to the world’s largest consumer market.
Multinational companies built complex global supply chains linking both economies.
However, as China’s economy grew to become the second largest in the world, tensions began to rise over trade imbalances, industrial policies, and national security concerns.
According to the U.S. Census Bureau, the US trade deficit with China peaked at over $419 billion in 2018, becoming a central political issue in Washington.
Source: https://www.census.gov/foreign-trade/balance/c5700.html
Key Reasons Behind the China–US Trade War
1. Large Trade Imbalance
One of the most frequently cited reasons for the trade war is the persistent trade deficit the United States has with China.
US policymakers argued that:
China exported far more goods to the US than it imported.
This imbalance contributed to job losses in American manufacturing.
Existing trade rules failed to create a “level playing field.”
While economists debate whether trade deficits are inherently harmful, the issue became a powerful political symbol, especially during the 2016 US presidential election.
2. Intellectual Property Theft Allegations
A major escalation point was US accusations that China engaged in:
Forced technology transfer
Intellectual property (IP) theft
Cyber espionage targeting American companies
In 2018, the Office of the United States Trade Representative (USTR) released a Section 301 report concluding that China’s practices harmed US intellectual property and innovation.
Official report:
https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF
These findings directly led to the imposition of tariffs on hundreds of billions of dollars worth of Chinese goods.
3. China’s State-Led Economic Model
China’s economic system differs significantly from the US free-market model. Key concerns include:
Heavy government subsidies to state-owned enterprises (SOEs)
Preferential financing from state banks
Industrial policies such as “Made in China 2025”
The US and its allies argue that these practices distort global markets and violate the spirit, if not always the letter, of WTO rules.
World Bank analysis of China’s state involvement:
https://www.worldbank.org/en/country/china/publication/china-economic-update
4. Strategic and Technological Competition
Beyond economics, the trade war reflects strategic rivalry between two global powers.
Technology sectors such as:
Semiconductors
Artificial intelligence
5G telecommunications
became battlegrounds. US restrictions on companies like Huawei were driven not only by trade concerns but also by national security fears.
Brookings Institution analysis:
https://www.brookings.edu/articles/the-technology-rivalry-between-the-united-states-and-china/
5. Domestic Political Factors in the United States
The trade war was also shaped by internal US politics:
Rising economic nationalism
Voter frustration in manufacturing regions
Bipartisan skepticism toward China
Trade policy became a tool to demonstrate toughness on China, appealing to domestic audiences even when economic costs were significant.
Council on Foreign Relations overview:
https://www.cfr.org/backgrounder/us-china-trade-war
How the Trade War Escalated
Between 2018 and 2020:
The US imposed tariffs on more than $360 billion of Chinese goods.
China retaliated with tariffs on US agricultural and industrial products.
Global markets experienced increased volatility.
The conflict led to the Phase One Trade Agreement signed in January 2020, but many core issues—such as subsidies and technology policy—remain unresolved.
Official agreement text:
https://ustr.gov/sites/default/files/files/agreements/phase%20one%20agreement/Economic_And_Trade_Agreement_Between_The_United_States_And_China_Text.pdf
Global Impact of the China–US Trade War
The trade war affected not only China and the US but also the global economy:
Supply chains shifted to countries like Vietnam and Mexico
Costs increased for businesses and consumers
Global trade growth slowed
The International Monetary Fund (IMF) estimated that prolonged trade tensions could reduce global GDP growth by up to 0.8%.
IMF analysis:
https://www.imf.org/en/Publications/WEO
Is the Trade War Over?
While tariff escalation has slowed, the trade war has not truly ended. Many tariffs remain in place, and strategic competition continues through:
Export controls
Investment restrictions
Industrial policy competition
Rather than a short-term dispute, the China–US trade war represents a long-term structural rivalry between two economic systems.
Conclusion
The China–US trade war happened not because of a single issue, but due to a combination of:
Trade imbalances
Intellectual property disputes
State-led economic policies
Technological competition
Geopolitical rivalry
Understanding these deeper causes is essential for businesses, policymakers, and consumers navigating today’s uncertain global economy. As China and the United States continue to redefine their economic relationship, the consequences will shape global trade for decades to come.